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Myths vs. Facts: China, Biotech, and National Security · Making Medicine

0:00
Speaker 1: At Making Medicine, we're reporting on the headlines, not making
0:03
Speaker 1: medical recommendations. For personal health questions, always ask your doctor.
0:08
Speaker 1: Nothing in this episode constitutes investment, financial, or legal advice.
0:13
Speaker 1: Consult your own advisors before making decisions. Ultimately, the goal
0:17
Speaker 1: shouldn't be to make it harder for China to innovate.
0:20
Speaker 1: It should be to make it easier for America to lead.
0:23
Speaker 1: You don't win the global biotech race by slowing down
0:26
Speaker 1: a competitor. You win by making this the best place
0:29
Speaker 1: to develop the next generation of medicines. Welcome back to
0:37
Speaker 1: the Making Medicine podcast, where science, policy, and innovation meet.
0:41
Speaker 1: I'm your host, Jon Stanford. We're stepping out of our
0:44
Speaker 1: usual episode format this week because China, biotech, and American
0:48
Speaker 1: competitiveness are back at the center of conversation in Washington.
0:52
Speaker 1: So today, the team at Incubate decided we're gonna walk
0:54
Speaker 1: through five of the most common myths in this debate,
0:57
Speaker 1: what's driving them, and what the facts actually show as
1:00
Speaker 1: we near a major moment, not just in US regulation,
1:03
Speaker 1: but potentially in Chinese regulation, for rethinking how biotech can
1:07
Speaker 1: work across borders. Let's get into the show. Over the
1:11
Speaker 1: last several years, policymakers, particularly in Congress, have raised concerns
1:15
Speaker 1: about the growing number of deals between Western pharmaceutical companies
1:19
Speaker 1: and Chinese biotech firms. Some of them have argued that
1:22
Speaker 1: these partnerships are strengthening a strategic competitor, threatening America's leadership
1:27
Speaker 1: in biotechnology, and potentially even putting national security at risk.
1:31
Speaker 1: Those concerns have helped fuel proposals to expand restrictions on
1:35
Speaker 1: American investment in Chinese biotech. including efforts to bring the
1:39
Speaker 1: sector under the Comprehensive Outbound Investment National Security Act, or
1:44
Speaker 1: COINS Act. As a refresher, the COINS Act was the
1:47
Speaker 1: piece of legislation in the broader defense bill last year
1:51
Speaker 1: that subjected AI, quantum, and hypersonic missile technology to increased
1:56
Speaker 1: restrictions for companies and investors that want to do business
2:00
Speaker 1: in China. The raging debate right now is whether or
2:02
Speaker 1: not Treasury can use its authority to add biotech to
2:06
Speaker 1: that list when it comes out with the final Coins
2:08
Speaker 1: Act regulations. And there's no question that China has become
2:12
Speaker 1: a serious competitor in biotech. Its scientific capabilities have advanced rapidly,
2:17
Speaker 1: its companies are developing increasingly sophisticated medicines, and pharmaceutical companies
2:22
Speaker 1: around the world are looking to China for promising new discoveries.
2:26
Speaker 1: So that brings us to today. And we really don't
2:30
Speaker 1: know when it's going to happen, but any day now,
2:32
Speaker 1: we do expect China Treasury, the Department of Treasury, to
2:36
Speaker 1: issue the guidance around the Coins Act that's going to
2:39
Speaker 1: really say what's covered, what's allowed, what has to be disclosed,
2:43
Speaker 1: and what's going to be stopped. And we should reflect
2:45
Speaker 1: there that those are the two levers. What the Coins
2:48
Speaker 1: Act says is some stuff is totally fine. It can continue.
2:52
Speaker 1: Other things, you're going to have to notify Treasury that
2:54
Speaker 1: you're doing it. And the last bucket are things that
2:57
Speaker 1: would actually be prohibited, that you cannot do it. So
3:02
Speaker 1: we're waiting pretty energetically for this to come out and
3:06
Speaker 1: see whether or not biotech is going to be included.
3:09
Speaker 1: And if so, what does that really mean? Are we
3:12
Speaker 1: talking about just bioweapon development is limited? Are they really
3:15
Speaker 1: going to go after one of those buckets like outlicensing
3:18
Speaker 1: and co-commercialization? It's a big question mark. And one, that
3:22
Speaker 1: in conversations with government, we really don't know how this
3:25
Speaker 1: is gonna land. But we do know that it could
3:28
Speaker 1: have tremendous impact. For us in Washington, there is some
3:32
Speaker 1: tea leaf reading, not to get too technical, but we
3:35
Speaker 1: did see in the Federal Register that the rule drafted
3:39
Speaker 1: by Treasury has now gone over to the White House
3:41
Speaker 1: and its Office of Management and Budget, or OMB, who's
3:45
Speaker 1: giving it a final look at the rule. And we
3:47
Speaker 1: do know that it's in the White House construct that
3:49
Speaker 1: a lot of national security voices want to take the
3:53
Speaker 1: most adversarial position against China as possible, not just in biotech,
3:58
Speaker 1: but across the entire economy. That's a tension that's going
4:01
Speaker 1: to play out. The economic competitiveness and, frankly, access to
4:05
Speaker 1: medicines for American patients versus purported national security risks. And
4:10
Speaker 1: that's why getting this debate is so important. We've got
4:14
Speaker 1: to base it in facts and not fears. So we're
4:17
Speaker 1: going to get into a few myths that we think
4:19
Speaker 1: need to be corrected in before final decisions by policymakers
4:22
Speaker 1: can be made. And on that topic of fear, I
4:25
Speaker 1: encourage you to check out one of our recent episodes.
4:28
Speaker 1: We sat down with Tim Scott, the CEO of Biocom,
4:31
Speaker 1: fresh off his trip from China. And if you want
4:34
Speaker 1: to understand the environment in China more, it's a great listen.
4:37
Speaker 1: And Tim does an incredible job breaking it down. But
4:40
Speaker 1: I was struck by something that he said, that you
4:42
Speaker 1: can't win by playing defense. You can't lead through fear.
4:48
Speaker 1: and that it's critically important that we embrace this moment
4:51
Speaker 1: and win in the United States by out innovating, by
4:54
Speaker 1: out competing. The idea that we can sit back and
4:57
Speaker 1: play defense on our ecosystem, as he put it, simply
5:00
Speaker 1: isn't going to be possible. But there are some problems
5:03
Speaker 1: with how some of this debate is being framed. And
5:06
Speaker 1: in order to develop good policy, we have to start
5:09
Speaker 1: with good data. But there's a problem with how much
5:11
Speaker 1: of this debate is being framed. For policymakers to create
5:15
Speaker 1: good policy, They have to start with good data and
5:17
Speaker 1: good facts that we can all agree on. And depending
5:21
Speaker 1: on your perspective, you might see China as both a
5:24
Speaker 1: threat to the U.S. biotech economy and our competitiveness, but
5:29
Speaker 1: you also might see it as a place where new
5:30
Speaker 1: medicines that could benefit American patients can come from. It's
5:34
Speaker 1: really important that we drill down on what's really happening,
5:37
Speaker 1: the numbers that are accurate and the ones that aren't.
5:40
Speaker 1: so that policymakers in the White House, Treasury, and in
5:43
Speaker 1: Congress can make the right decisions in the coming weeks.
5:46
Speaker 1: So this episode is going to dig into five myths
5:49
Speaker 1: that we've seen from media, from policymakers, and from others
5:53
Speaker 1: that might be mischaracterizing the relationship. And it is a
5:56
Speaker 1: complex relationship. We look forward to getting a lot of
5:59
Speaker 1: comments and thoughts from viewers on this episode. The last
6:02
Speaker 1: thing I want to say before we get into the
6:04
Speaker 1: myths is how we at Incubate think about China. There's
6:08
Speaker 1: So many elements of the relationship with the economy across
6:11
Speaker 1: the Pacific that we've tried to break it down into
6:13
Speaker 1: not just one China question, but really three different buckets.
6:18
Speaker 1: The first bucket has to do with the actual materials
6:21
Speaker 1: that are used to make medicines. In this bucket, we're
6:25
Speaker 1: talking about key starting materials, KSMs, or active pharmaceutical ingredients, APIs.
6:31
Speaker 1: There's not a lot of debate around KSMs and APIs.
6:35
Speaker 1: It makes a lot of sense that the U.S. would
6:37
Speaker 1: want to be able to have the materials needed, the
6:40
Speaker 1: raw materials, in order to make medicines in the context
6:43
Speaker 1: of a future conflict that might mean a country was
6:46
Speaker 1: denying us those materials. That's part of a broader critical
6:50
Speaker 1: materials debate, and there's a lot of investment being made
6:53
Speaker 1: so that the U.S. does have access to those materials. Now,
6:56
Speaker 1: that's as much of an issue of where we want
6:58
Speaker 1: these chemicals being processed and put together as it is
7:02
Speaker 1: about geopolitics and strategy. And so that bucket is not
7:06
Speaker 1: one where there seems to be a lack of consensus.
7:10
Speaker 1: And so on that bucket, it seems that there is consensus,
7:13
Speaker 1: that that is a strategic investment for the United States
7:16
Speaker 1: to make sure that KSMs and APIs are available here.
7:19
Speaker 1: We'll set that one to the side because that's not
7:21
Speaker 1: really where Incubate and the Making Medicine team spend our
7:24
Speaker 1: time thinking about the early stage ecosystem. The other two
7:28
Speaker 1: buckets are much more interesting. The next bucket is the
7:32
Speaker 1: idea of where our clinical trial research gets done. It
7:36
Speaker 1: is no secret that over the last several decades, CDMO
7:39
Speaker 1: and CRO services in China have become the place to
7:43
Speaker 1: go to. They're faster, they're cheaper, and they give a
7:47
Speaker 1: head start to companies that want to know if one
7:49
Speaker 1: of their assets is promising. But there is a concern
7:53
Speaker 1: that with so much of that science moving to China,
7:55
Speaker 1: we're losing the workforce, we're losing the know-how, and we're
7:58
Speaker 1: losing the infrastructure to do that here. But the reality is,
8:02
Speaker 1: ask any biotech or any investor, the U.S. is far
8:07
Speaker 1: off from being competitive on price or time, which is
8:10
Speaker 1: often more important than not just China, but so many
8:13
Speaker 1: countries around the world. Australia has made such an effort
8:16
Speaker 1: to close the gap and be an alternative to China.
8:19
Speaker 1: We know this is a priority in the United Kingdom.
8:22
Speaker 1: And so there's some debate about whether or not biotechs
8:25
Speaker 1: should be allowed to use CRO and CDMO services. This
8:29
Speaker 1: is gonna be an ongoing piece of the conversation. The
8:32
Speaker 1: last bucket has to do with whether or not US investors, companies,
8:37
Speaker 1: and biotech should be able to license or take out
8:41
Speaker 1: materials from China, innovative new ideas that can be spun
8:44
Speaker 1: up as new companies here. So this conversation about out-licensing,
8:49
Speaker 1: about co-development and co-commercialization is really at the center of
8:53
Speaker 1: this debate. And whether or not we want to be
8:56
Speaker 1: able to have US investors using their capital to bring
9:01
Speaker 1: Chinese innovation to the U.S. and develop the drug here.
9:04
Speaker 1: So those are three different buckets, KSM and APIs, the
9:08
Speaker 1: idea of where we do our clinical research, and finally,
9:11
Speaker 1: the ability to out-license out of China. The first myth,
9:16
Speaker 1: and the one we see the most in media that
9:18
Speaker 1: really does need to be corrected, is this idea of
9:21
Speaker 1: $ 120 billion in pharma deals means $ 120 billion went to China.
9:27
Speaker 1: If you read the headlines about pharmaceutical companies announcing multi-billion
9:30
Speaker 1: dollar deals with Chinese biotech firms, you might reasonably assume
9:34
Speaker 1: that enormous amounts of US money are being transferred overseas.
9:39
Speaker 1: Look no further than Roche's deal this week. But that's
9:42
Speaker 1: not what's happening. In the pharmaceutical industry, there's actually a
9:46
Speaker 1: term for many of these headline figures, biobucks. Biobucks represent
9:51
Speaker 1: the maximum potential value of a licensing agreement, including payments
9:55
Speaker 1: that might only be made years down the road if
9:58
Speaker 1: an experimental medicine successfully advances through clinical development, receives regulatory approval,
10:05
Speaker 1: and achieves commercial milestones. And anyone who understands drug development
10:09
Speaker 1: knows that very little goes exactly according to plan. Most
10:13
Speaker 1: experimental medicines, especially these that are coming out of China,
10:17
Speaker 1: will never make it to market. Some will fail in
10:20
Speaker 1: clinical trials. Others encounter safety concerns or don't work as
10:24
Speaker 1: expected or never become commercially viable. Maybe payers don't believe
10:29
Speaker 1: they're as effective as the data would suggest. And when
10:32
Speaker 1: those milestones aren't reached, the corresponding payments aren't made. That's
10:36
Speaker 1: why a deal announced as being worth several billion dollars
10:40
Speaker 1: might involve only a few hundred million dollars paid up
10:43
Speaker 1: front or even less, with the vast majority dependent on
10:47
Speaker 1: future outcomes. And while those upfront payments can be significant,
10:51
Speaker 1: they're nowhere near the eye-popping totals that dominate the headlines.
10:55
Speaker 1: These deals also aren't simply transfers of money. Pharmaceutical companies
10:59
Speaker 1: are acquiring rights to promising discoveries, taking on development risks,
11:03
Speaker 1: and potentially bringing new treatments to patients around the world.
11:07
Speaker 1: So when a headline points to $ 120 billion in deals,
11:12
Speaker 1: as our friends at Fierce Pharma have pointed out recently,
11:15
Speaker 1: That's not really money flowing to China. We should ask
11:19
Speaker 1: two basic questions about that amount. How much money is
11:23
Speaker 1: actually being paid? And what are companies receiving in return?
11:27
Speaker 1: Because understanding the economics of these agreements is essential to
11:30
Speaker 1: understanding what they mean for American competitiveness. The fact is
11:34
Speaker 1: 120 billion announced in 2026 for licensing deals does not
11:39
Speaker 1: mean 120 billion has been invested in China. Much of
11:42
Speaker 1: that headline value consists of contingent payments that will never materialize.
11:47
Speaker 1: A good analogy is thinking about NFL quarterbacks or any
11:50
Speaker 1: incredible player that gets a wildly high $ 100 million, $ 300
11:56
Speaker 1: million contract over X number of years. The first question
12:00
Speaker 1: that agent is asking is how much of that is guaranteed.
12:03
Speaker 1: And often, very little of it is guaranteed. It's based
12:07
Speaker 1: on if the player stays healthy, if the player accomplishes
12:10
Speaker 1: its goals, if the quarterback takes the team to a
12:12
Speaker 1: Superbowl Then it can realize all of the money. It's
12:16
Speaker 1: the exact same thing with biobucks. Most of these are
12:19
Speaker 1: never going to materialize. In fact, recent analysis shows only
12:23
Speaker 1: 5% to 10% of the dollars in these promised deals
12:27
Speaker 1: stand a good chance of making it at the end
12:30
Speaker 1: of the day. And so when we see a billion-dollar deal,
12:35
Speaker 1: we need to know that what we're really talking about
12:38
Speaker 1: is $ 15, $ 20, $ 50 million up front, which is no
12:41
Speaker 1: small sum. but it is nothing compared to the large
12:45
Speaker 1: amounts that we're talking about. For example, if this $ 120
12:49
Speaker 1: billion figure was real, it would represent three times the
12:54
Speaker 1: total amount invested by venture capital and biotech in the
12:58
Speaker 1: highest years biotech has ever been invested in. It would
13:02
Speaker 1: even be more than all of the acquisition, R & D,
13:06
Speaker 1: and internal spending happening at large manufacturers. We understand why
13:11
Speaker 1: policymakers would be concerned about $ 100- plus billion making its way
13:16
Speaker 1: from the United States to an economic competitor like China.
13:20
Speaker 1: And that's why it's so critical that people caveat that number.
13:24
Speaker 1: The reality is, yes, on a headline, we're announcing potential 10,
13:28
Speaker 1: 15 years' worth of milestone payments. But the reality is
13:32
Speaker 1: a much smaller number. Several billion, to be sure, will
13:36
Speaker 1: go over to China in 2026. And that's okay because
13:39
Speaker 1: we're going to talk about in a second the value
13:42
Speaker 1: accretion and hitting the home run on the back end
13:46
Speaker 1: is really going to stay in the United States. Myth
13:48
Speaker 1: number two, American biotech backed by American capital should innovate
13:53
Speaker 1: for American patients. This is an argument that you can
13:56
Speaker 1: imagine in today's environment we hear frequently in Washington. American
14:00
Speaker 1: capital should support American biotech companies that develop medicines for
14:04
Speaker 1: American patients. It sounds logical. After all, shouldn't American investment
14:09
Speaker 1: benefit Americans? Of course it should. But there's a fundamental
14:12
Speaker 1: problem with the assumption that the best way to accomplish
14:15
Speaker 1: that goal is to keep investment and innovation within our borders,
14:19
Speaker 1: to innovate in a closed loop. Only two weeks ago,
14:22
Speaker 1: we were in Japan that tried a closed loop innovate
14:25
Speaker 1: in Japan for Japan strategy. that didn't materialize and led
14:29
Speaker 1: to them opening up to the globalized ecosystem where they've
14:33
Speaker 1: begun to see development. And another reality is just that
14:36
Speaker 1: drug development isn't a zero-sum game. In fact, some American
14:40
Speaker 1: biotech companies are being built around medicines originally discovered in China.
14:44
Speaker 1: Summit Therapeutics is a US-based biotech company, but it's developing
14:48
Speaker 1: an experimental cancer treatment originally discovered by a Chinese company.
14:53
Speaker 1: Summit licensed the medicine and is now leading extensive clinical
14:56
Speaker 1: development programs including trial sites in the U.S. Just this week,
15:00
Speaker 1: Summit announced a new phase two trial, exploring whether its
15:03
Speaker 1: medicine could benefit patients with advanced kidney cancer. Studies expected
15:08
Speaker 1: to enroll approximately 100 patients, both in the United States
15:11
Speaker 1: and China. Consider two other American companies, Braveheart Bio and
15:15
Speaker 1: Chilera Therapeutics. Similar stories, original medicines that came out of Hengray.
15:21
Speaker 1: There's too many to count, and I think it's hard
15:23
Speaker 1: to say which of these count as American innovation. There's
15:27
Speaker 1: also an ethical question here. What is best for American patients?
15:32
Speaker 1: Is it getting the best possible drugs to them fastest,
15:36
Speaker 1: or is it saying they can only have access to
15:38
Speaker 1: drugs that truly were born out of the NIH and
15:41
Speaker 1: academia and spent their whole time in U.S. biotechs backed
15:45
Speaker 1: by U.S. capital? That's certainly one perspective, but what is
15:48
Speaker 1: clear is that will mean fewer drugs that take longer
15:52
Speaker 1: to get there. It's hard to segment out where the
15:54
Speaker 1: most valuable innovation occurs. Do we care most about generating
15:59
Speaker 1: new assets out of academic labs? Or do we care
16:02
Speaker 1: most about being best at spinning up Nucos and seeing
16:06
Speaker 1: a drug through its development, not just here in the US,
16:08
Speaker 1: but around the world, and then being acquired by a
16:11
Speaker 1: large pharmaceutical company? That's an open question. But what is
16:15
Speaker 1: a myth is the idea that we can do it
16:17
Speaker 1: all without trade-offs. And I think an extension of this
16:21
Speaker 1: is the suggestion that if US investors are investing somewhere else,
16:26
Speaker 1: then they simply aren't investing in U.S. biotech. The data
16:29
Speaker 1: doesn't support that. There are still billions and billions of
16:33
Speaker 1: dollars going into U.S. biotech. And if you look across
16:36
Speaker 1: the portfolio companies of any of the large major VCs,
16:40
Speaker 1: the vast majority of companies that they're investing in are
16:43
Speaker 1: here in the United States. But there is no doubt
16:47
Speaker 1: more and more competition, not just in China, but around
16:50
Speaker 1: the world. And it's incumbent upon the investors to look
16:54
Speaker 1: at the best opportunities that are made available to them.
16:57
Speaker 1: They are fiduciary stewards, watching over the capital that has
17:01
Speaker 1: been trusted to them. And frankly, that's not even a
17:04
Speaker 1: zero-sum game. It's not like endowments and pensions are guaranteeing
17:08
Speaker 1: every year that 3 or 4% will get invested in biotech. Biotech,
17:13
Speaker 1: more broadly, has to compete with dollars against AI, against
17:17
Speaker 1: new energy developments. and even against much safer hedges against
17:21
Speaker 1: high interest rates. We know all too well that it
17:24
Speaker 1: is hard enough to raise money in biotech. And so
17:26
Speaker 1: the question is, can raising that money still tolerate being
17:30
Speaker 1: told you have to shut your blinders to innovation around
17:33
Speaker 1: the world and only invest here in the U.S.? Or
17:36
Speaker 1: is there more opportunity for the pie to grow if
17:39
Speaker 1: those venture capitalists can show they have access to innovation
17:42
Speaker 1: around the world? It's a fundamental question and one that
17:45
Speaker 1: policymakers deservedly are struggling with, but it's a myth to
17:49
Speaker 1: say that we can have it all here in America,
17:51
Speaker 1: that we can develop drugs on U.S. capital from start
17:55
Speaker 1: to finish and not sacrifice either access to patients or
17:58
Speaker 1: access to new innovation. Myth number three, cutting off American
18:03
Speaker 1: investment will stop China's biotech growth. Let's assume policymakers do
18:08
Speaker 1: take the most restricting perspective they can and stop American
18:12
Speaker 1: investment in Chinese biotech. What happens next? Does China's biotech
18:17
Speaker 1: sector stop developing new medicines? Does its scientific progress grind
18:20
Speaker 1: to a halt? Almost certainly not. China has spent decades
18:25
Speaker 1: building its biotech ecosystem and has made it clear that
18:28
Speaker 1: developing a globally competitive biotech industry is a long term,
18:32
Speaker 1: national priority. In fact, China's National Bioeconomy Development Plan establishes
18:38
Speaker 1: an ambition to become a global leader in biotech by 2035.
18:41
Speaker 1: They're well on their way, but they believe that they
18:45
Speaker 1: have so much further to go over the next decade,
18:47
Speaker 1: and it'll be supported by government investment, domestic research capabilities,
18:51
Speaker 1: and policies designed to accelerate scientific innovation. This isn't a
18:56
Speaker 1: short-term initiative that depends on American venture capital. I'll say
19:00
Speaker 1: that again. This is not a narrow window to tap
19:04
Speaker 1: into US VC. This is a much larger national strategy.
19:08
Speaker 1: Just last week, we saw another indication of how seriously
19:12
Speaker 1: China is taking its biotech ambitions. On October 16th, China's
19:16
Speaker 1: Ministry of Commerce proposed new restrictions on the export of
19:20
Speaker 1: 40 advanced technologies, including five categories in biotech. Those proposed
19:26
Speaker 1: restrictions cover technologies related to cell and gene therapies, small
19:31
Speaker 1: nucleic acid medicines, and pathogenic microorganisms. China specifically carved out
19:36
Speaker 1: pathways for licensing agreements and partnerships and contract research involving
19:42
Speaker 1: certain technologies, but China, in other words, is seeking to
19:45
Speaker 1: protect the strategically important technologies while preserving opportunities for its
19:50
Speaker 1: biotech companies to work with foreign partners. Both of these
19:53
Speaker 1: things can't be true. If China is so dependent on
19:57
Speaker 1: the U.S., it would not be wanting to restrict its
20:01
Speaker 1: own companies from exploring partnerships with the United States. I
20:05
Speaker 1: think this is a critical point that is getting missed.
20:08
Speaker 1: For anyone who follows China and China analysts here in
20:12
Speaker 1: the U.S., one thing is consistently clear. China will tell
20:16
Speaker 1: you what it's going to do and then tends to
20:18
Speaker 1: execute on that vision. China told us two decades ago
20:22
Speaker 1: that they want to be the home to not just
20:25
Speaker 1: MeToo drugs and trying to steal American IP. They wanted
20:28
Speaker 1: to be truly innovative and have world-class biotech capabilities. And
20:32
Speaker 1: they have it now. We have every reason to believe
20:36
Speaker 1: that China will try to maintain this dominance. But under
20:39
Speaker 1: this same idea, if we did try to wall off China,
20:43
Speaker 1: and let's say China does change course and doesn't want
20:46
Speaker 1: to keep pouring money in, they're still sitting on a
20:49
Speaker 1: treasure trove of assets that have novel innovation to them.
20:53
Speaker 1: And it's worth looking at how Europe or Japan is
20:56
Speaker 1: approaching investment restrictions, and would they fill the gap left
21:00
Speaker 1: by American capital? In June of this year, the European
21:04
Speaker 1: Union finalized its new foreign investment screening rules focused on
21:08
Speaker 1: sensitive technologies and national security risks. That included dual-use technologies,
21:13
Speaker 1: military equipment, and critical infrastructure. Those rules, which will take
21:17
Speaker 1: effect in 2028, do not establish a blanket biotech or
21:21
Speaker 1: pharmaceutical restriction. There's a reason why Europe sees the opportunity
21:26
Speaker 1: of U.S. turning its back on Chinese innovation as their
21:30
Speaker 1: way to gain a seat back at the innovation table.
21:33
Speaker 1: They've been missing for a while. This would be a
21:35
Speaker 1: huge opportunity for them to go source innovation out of China,
21:40
Speaker 1: commercialize it out of European companies, and reestablish its own dominance.
21:44
Speaker 1: That is why they left biotech and pharmaceutical restrictions out
21:49
Speaker 1: of the policies that'll go in place as it relates
21:51
Speaker 1: to China. So while Washington considers sweeping restrictions on biotech investment,
21:56
Speaker 1: other major economies are taking a targeted approach that creates
21:59
Speaker 1: a real risk that American investors could be sidelined while
22:02
Speaker 1: their international competitors continue participating in China's growing biotech sector.
22:08
Speaker 1: So the question shouldn't simply be whether the U.S. can
22:10
Speaker 1: restrict investment in China. It should be whether doing so
22:14
Speaker 1: meaningfully strengthens America's competitive position because China's commitment to biotech
22:19
Speaker 1: isn't going away. If the myth is that we can
22:23
Speaker 1: stop China. The fact is that China has made biotech
22:27
Speaker 1: a long-term national priority. It's taking steps to protect its
22:31
Speaker 1: emerging advantages. Restricting American investment is unlikely to change that trajectory,
22:36
Speaker 1: but it could leave American investors and companies on the sidelines.
22:40
Speaker 1: Myth number four, every biotech investment in China is a
22:44
Speaker 1: national security risk. Let's talk about national security. There are
22:48
Speaker 1: absolute legitimate national security concerns involving biotech and, as we've said,
22:53
Speaker 1: APIs and KSMs. But beyond that, certain technologies can have
22:57
Speaker 1: military applications. Sensitive biological data requires protection, and governments have
23:02
Speaker 1: a responsibility to prevent American capital and expertise from enabling
23:06
Speaker 1: capabilities that could threaten our security. Those concerns deserve serious attention,
23:11
Speaker 1: and they are getting it. But biotech as a term
23:14
Speaker 1: is an incredibly broad field. It encompasses everything from technologies
23:18
Speaker 1: that could be used to develop biological weapons to treatments
23:22
Speaker 1: to Alzheimer's disease, childhood cancers, rare genetic disorders, and other
23:26
Speaker 1: serious medical conditions. We shouldn't treat those as the same thing,
23:30
Speaker 1: and we should be aware that if we do, we
23:32
Speaker 1: run the risk of unintended consequences. Consider a true success story,
23:37
Speaker 1: Candid Therapeutics, a biotech company based in San Diego. Candid
23:41
Speaker 1: built its pipeline around experimental medicines originally developed by Chinese
23:45
Speaker 1: biotech companies, including an antibody-based therapy licensed from Wuxi Biologics.
23:51
Speaker 1: The company's focus was developing treatments for autoimmune diseases, using
23:55
Speaker 1: therapies designed to target specific cells involved in each disease.
23:59
Speaker 1: In March of this year, Candid announced more than $ 500
24:03
Speaker 1: million in new financing. Just a few months later, it
24:06
Speaker 1: was acquired by UCB for $ 2. 2 billion. That's a concrete
24:11
Speaker 1: example of how promising science developed in China created value
24:14
Speaker 1: through biotech development elsewhere. It also raises an important question
24:20
Speaker 1: for national security. If an investor is supporting the development
24:23
Speaker 1: of an antibody that targets a specific protein, involved in cancer,
24:27
Speaker 1: or an autoimmune disease, what exactly is the national security threat?
24:31
Speaker 1: Is the concern the therapeutic target itself, the underlying technology,
24:35
Speaker 1: the transfer of sensitive manufacturing capabilities, or the identity of
24:38
Speaker 1: a company receiving the investment? One of the biggest challenges
24:42
Speaker 1: the U.S. government and the teams working on the COINS
24:45
Speaker 1: Act implementation is going to be sorting through which actually
24:49
Speaker 1: poses national security risks and which don't. But the tradeoffs
24:52
Speaker 1: are very real. We want the next Candid Therapeutics to
24:56
Speaker 1: not just be an economic success, but a success for
24:58
Speaker 1: patients with new medicines. We're going to have to work
25:01
Speaker 1: to tailor these approaches to say, what is really a
25:04
Speaker 1: threat to national security from either a data or bioweapon standpoint,
25:09
Speaker 1: and still allow, if possible, as much innovation to make
25:12
Speaker 1: its way to American patients. Candid is also a good
25:15
Speaker 1: example of that first myth. and where the biobucks, when
25:18
Speaker 1: good things actually do happen, really go. When UCB acquired
25:22
Speaker 1: Candid Therapeutics, those biobucks were realized. It's one of the
25:27
Speaker 1: success stories when a biotech does get fully acquired. But
25:30
Speaker 1: the reality is the vast majority of that revenue, the
25:35
Speaker 1: vast majority of that $ 2 billion is going to stay
25:38
Speaker 1: right here in the United States, going back to U.S.
25:41
Speaker 1: investors who will redeploy capital into the next great company.
25:45
Speaker 1: Only a sliver, tens of millions of dollars out of
25:48
Speaker 1: a $ 2 billion transaction goes back to China. That's an
25:53
Speaker 1: economic opportunity we should be seizing. At a moment where
25:57
Speaker 1: both policies are talking about making Americans winners and avoiding
26:00
Speaker 1: being losers, it is as simple as, in that deal,
26:04
Speaker 1: America won. 90% of $ 2 billion is a lot of
26:09
Speaker 1: money staying here for a seemingly smaller amount to go
26:13
Speaker 1: back to China in the form of tens of millions
26:15
Speaker 1: of dollars. And that is exactly why China wants to
26:18
Speaker 1: restrict the ability for U.S. investors and U.S. companies to
26:22
Speaker 1: realize all the value that's created during the drug development process.
26:26
Speaker 1: Stay tuned to this issue because this is something that
26:29
Speaker 1: Incubate will be digging deeper in as we explore what
26:32
Speaker 1: the economic impact would be if we couldn't realize that
26:35
Speaker 1: value here in the United States. Myth number five. The
26:39
Speaker 1: best way to beat China in biotech is to restrict China.
26:42
Speaker 1: Our final myth gets to what I think is the
26:44
Speaker 1: most important point in this entire debate. Over the past
26:47
Speaker 1: several years, there's been growing recognition in Washington that biotech
26:51
Speaker 1: is strategically important to the United States. That's a good thing.
26:55
Speaker 1: Biotech creates high-paying jobs. It drives economic growth. It supports
26:59
Speaker 1: American manufacturing. And most importantly, it produces medicines that save
27:03
Speaker 1: and improve lives. But too often, conversations about competition with
27:08
Speaker 1: China start and end with restrictions. What can we prohibit?
27:12
Speaker 1: What can we block? How can we prevent American companies
27:15
Speaker 1: from engaging with Chinese companies? Those may be appropriate questions
27:18
Speaker 1: when addressing specific national security threats, but they aren't a
27:22
Speaker 1: comprehensive strategy for winning the global biotech race. If we
27:26
Speaker 1: want the United States to remain the world's leading destination
27:29
Speaker 1: for biotech investment, we need to make this country the
27:31
Speaker 1: best place to discover, develop, finance, and commercialize new medicines.
27:36
Speaker 1: That means strong intellectual property protections. It means a predictable,
27:40
Speaker 1: efficient FDA that can keep pace with scientific advances. It
27:44
Speaker 1: means sustained federal investment in basic research. It means a
27:48
Speaker 1: policy environment that attracts venture capital and helps emerging biotech
27:52
Speaker 1: companies grow. And it means recognizing how decisions about drug
27:55
Speaker 1: pricing and reimbursement affect regulation and the willingness of investors
28:00
Speaker 1: to finance the next generation of treatments. Those are all
28:04
Speaker 1: important questions and are challenges facing American biotech companies today.
28:09
Speaker 1: Many are struggling to raise capital. Clinical development is enormously
28:13
Speaker 1: expensive and slow. That regulatory uncertainty adds months or years
28:17
Speaker 1: to development timelines and government policies are directly affecting the
28:21
Speaker 1: potential return on investment that may take a decade or
28:24
Speaker 1: longer to pay off. Those are issues policymakers can actually
28:28
Speaker 1: address that have nothing to do with putting restrictions on China.
28:33
Speaker 1: Doing so would only strengthen our competitive position regardless of
28:36
Speaker 1: what happens in China. Because here's the fundamental problem with
28:40
Speaker 1: a strategy based on restrictions. Even if you make it
28:43
Speaker 1: harder for a competitor to advance, that doesn't mean you've
28:46
Speaker 1: made yourself any stronger. And if those restrictions also limit
28:49
Speaker 1: American companies' access to promising science... capital, and partnerships, you
28:54
Speaker 1: could actually weaken the industry you're trying to protect. The U.S.
28:58
Speaker 1: has extraordinary advantages in biotech. We have world-class universities, leading
29:03
Speaker 1: research institutions, experienced investors, innovative entrepreneurs, and an unmatched ecosystem
29:08
Speaker 1: for turning scientific breakthroughs into medicines. The challenge is maintaining
29:13
Speaker 1: and strengthening those advantages. So if the myth is the
29:16
Speaker 1: best way to beat China is to restrict China... The
29:20
Speaker 1: fact is that American leadership depends on making the United
29:23
Speaker 1: States the most attractive place in the world, not restricting
29:26
Speaker 1: what happens elsewhere. We have to double down on our
29:29
Speaker 1: commitments at the FDA and to entrepreneurs and their financiers everywhere.
29:34
Speaker 1: That's what will keep us moving ahead. So let's close
29:37
Speaker 1: out by returning to where we started. A hundred billion
29:40
Speaker 1: in pharmaceutical deals is simply not that. It may be
29:44
Speaker 1: a striking number, but it isn't a reality. And as
29:47
Speaker 1: we've discussed today, the headlines aren't telling the full story,
29:50
Speaker 1: which means policymakers may not know the full story. Drug
29:53
Speaker 1: development isn't a zero-sum game. American companies and patients can
29:58
Speaker 1: and do benefit from scientific discoveries made overseas. And not
30:02
Speaker 1: every investment in biotech presents a true national security threat.
30:06
Speaker 1: One thing is certain, China isn't going to stop investing
30:09
Speaker 1: in biotech. It's a national priority, and restricting our participation
30:13
Speaker 1: isn't going to change that. We do need to protect
30:16
Speaker 1: national security and safeguard sensitive technologies. We need to recognize
30:20
Speaker 1: that competing with China requires more of us than what
30:24
Speaker 1: we can do to them. It requires strengthening what makes
30:26
Speaker 1: America the global leader in biotech, our institutions, our entrepreneurs,
30:31
Speaker 1: our investors. Ultimately, the goal shouldn't be to make it
30:34
Speaker 1: harder for China to innovate. It should be to make
30:37
Speaker 1: it easier for America to lead. You don't win the
30:40
Speaker 1: global biotech race by slowing down a competitor. You win
30:44
Speaker 1: by making this the best place to develop the next
30:47
Speaker 1: generation of medicines. That's a strategy that benefits American companies,
30:51
Speaker 1: American workers, and patients everywhere. And we hope that by
30:54
Speaker 1: addressing some of these myths, that is the path that
30:57
Speaker 1: American policymakers decide to go down. That's it for this
31:01
Speaker 1: week's episode. We hope debunking some of the myths around
31:04
Speaker 1: the China debate can be valuable to you, whether you're
31:06
Speaker 1: in media covering this topic, you're a policymaker, or just
31:10
Speaker 1: a biotech trying to keep up with the changing rules
31:13
Speaker 1: and regulations as it relates to global drug development. If
31:16
Speaker 1: you found this episode useful, share it with a colleague
31:19
Speaker 1: and subscribe so you don't miss what's next. Thanks for listening.
31:23
Speaker 1: And as always, keep innovating.