Latest / Making Medicine / Inside the COINS Act: How Treasury’s China Rule Could Reshape Drug Development

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Inside the COINS Act: How Treasury’s China Rule Could Reshape Drug Development · 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.
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Speaker 2: Tough. That was my knee-jerk reaction. And I think like,
0:20
Speaker 2: You know, it required me to take a step back,
0:21
Speaker 2: I think, to sort.
0:22
Speaker 3: Of glean the nuance. And I think that really applies
0:24
Speaker 3: to all of us.
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Speaker 2: But I think like at its face, the fact that
0:27
Speaker 2: pharmaceutical compounds are mentioned as a covered product. So to me,
0:31
Speaker 2: that jumped out in terms of Treasury listing medicines as
0:36
Speaker 2: something that they're keeping an eye on and the deal flow.
0:44
Speaker 1: Welcome back to the Making Medicine podcast, where science, policy
0:48
Speaker 1: and innovation meet. I'm your host, John Stanford. Last week,
0:52
Speaker 1: the U.S. Treasury Department proposed new rules that would limit U.S.
0:56
Speaker 1: investment in a wide range of Chinese biotech, from small
0:59
Speaker 1: molecules to cell and gene therapies. Today, we're talking about
1:03
Speaker 1: what that means for investors who fund new medicines and
1:06
Speaker 1: for the patients who depend on them. Here to break
1:08
Speaker 1: it down on one of our Press Pass episodes is
1:11
Speaker 1: Max Baer, senior reporter at Endpoints News. who's been at
1:15
Speaker 1: the forefront of coverage on a lot of the biggest
1:17
Speaker 1: breaking issues for our industry and is the right person
1:20
Speaker 1: to be talking to about this much-awaited coins proposed rule.
1:24
Speaker 1: So let's get into the show. We'll be joined by
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Speaker 1: Max in just a second. And this episode is really
1:30
Speaker 1: focused on the China conversation, the Coins Act regs, and
1:33
Speaker 1: I'm excited to get into those details. But I want
1:36
Speaker 1: to tease two other things that are happening right now
1:38
Speaker 1: that we'll definitely be talking about on the Making Medicine podcast.
1:42
Speaker 1: The first is a much-awaited FDA reform bill, bipartisan, has
1:47
Speaker 1: finally been dropped, and we'll be digging into what it
1:50
Speaker 1: has in it and what it means with some special
1:52
Speaker 1: guests later this month. We also don't want to miss
1:56
Speaker 1: the news story, also out of Endpoints, by Max's colleague,
2:00
Speaker 1: that talks about how MFN is changing some pharmaceutical companies'
2:04
Speaker 1: equations about when they launch in Europe. So those episodes
2:07
Speaker 1: will be coming up later this month, but we'll bring
2:10
Speaker 1: Max on now to talk about the most talked about issue,
2:13
Speaker 1: China and the Coins Act regulations. Max, welcome back to
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Speaker 1: the show.
2:17
Speaker 3: Hello, thanks for having me, John.
2:19
Speaker 1: You know, these Press Pass episodes, we don't know, we're
2:22
Speaker 1: looking who's got the best story out there, who's been
2:26
Speaker 1: covering something we want to talk about. something that's going
2:29
Speaker 1: to matter to the investment community. We're never certain who
2:32
Speaker 1: we want to have on about once a month. With
2:35
Speaker 1: Coinzex stuff, there was no discussion among the team about
2:39
Speaker 1: which reporter to have on because this has been your beat.
2:43
Speaker 1: You have so many beats, but this is one that
2:46
Speaker 1: you have been dogged about in Washington. Before we get
2:50
Speaker 1: into the regs themselves, What made you cover it? How
2:54
Speaker 1: long have you been covering it? What have you picked
2:56
Speaker 1: up along the way that, you know, we'll talk about
2:59
Speaker 1: culminating in the proposed rule last week?
3:01
Speaker 3: Yeah, thank you for having me. Thank you for that
3:03
Speaker 3: very kind intro.
3:04
Speaker 2: You know, I think there have been some other good
3:05
Speaker 2: reporters on it as well. It sort of was, you know,
3:11
Speaker 2: we as a whole newsroom at Endpoints have sort of
3:14
Speaker 2: wanted to make the China biotech story like a focus
3:17
Speaker 2: this year. So, The deal making, the deals themselves, my
3:22
Speaker 2: colleague Ryan Cross has been doing some excellent coverage on
3:25
Speaker 2: some of the IIT trials, safety stuff there. So it's
3:28
Speaker 2: been like really across the newsroom that we've been looking to.
3:33
Speaker 2: sort of make our mark, if you will, or sort
3:35
Speaker 2: of establish Endpoints as a valuable resource in this entire story.
3:41
Speaker 2: And then, you know, for me, covering like the drug
3:45
Speaker 2: industry's relationship to Washington, which is broad, and hence why
3:49
Speaker 2: sort of I've covered different things over, you know, the
3:51
Speaker 2: last couple of years, this was like a huge story
3:54
Speaker 2: as it started to percolate over the summer. And so
3:58
Speaker 2: that includes some of the very early letters from lawmakers
4:02
Speaker 2: to Treasury about including biotech, obviously Binza and the China
4:08
Speaker 2: Select Committee, and Representative John Molinar, the chairman of that committee,
4:13
Speaker 2: and then ultimately what Treasury was doing. So I just
4:16
Speaker 2: felt like it was really important in terms of what
4:18
Speaker 2: I contributed to the newsroom that I made coins of focus,
4:22
Speaker 2: because as it pertains to China biotech policy, You really
4:27
Speaker 2: have sort of coins and Binza, which are, you know,
4:30
Speaker 2: two sides of the same coin, no pun intended. They're
4:33
Speaker 2: sort of talking about the same thing with maybe different outcomes.
4:37
Speaker 3: And then you have like the FDA.
4:39
Speaker 2: And I think there's sort of maybe more to talk
4:42
Speaker 2: about and look at there, you know, next year as
4:46
Speaker 2: far as sort of how they look and assess that
4:48
Speaker 2: data from China as it becomes more common in application.
4:51
Speaker 1: So.
4:52
Speaker 2: This is just something that sort of felt necessary. And
4:54
Speaker 2: so I've been making it a huge point of conversation
4:57
Speaker 2: with people.
4:57
Speaker 1: I'm going to continue to bury the lead. I promise
5:00
Speaker 1: listeners we're going to get into what's in the reg.
5:02
Speaker 1: We're going to get Max's thoughts on it. But on
5:05
Speaker 1: the BINSA front, something that you and I have talked
5:07
Speaker 1: about peripherally, you know, with biotech added to coins, do
5:14
Speaker 1: you think that removes some of the emphasis Congress has?
5:19
Speaker 1: Have you talked to any of the BINSA folks of, Hey,
5:22
Speaker 1: you know, your whole thing was get biotech into coins.
5:25
Speaker 1: Guess what? Biotech is in coins from the proposed rule.
5:28
Speaker 1: Do you think that slows down? And I wouldn't say
5:31
Speaker 1: the Benz train was cruising towards this NDAA. But do
5:35
Speaker 1: you think this removes some of the urgency?
5:37
Speaker 3: I do. It's funny. I did ask.
5:40
Speaker 2: We had an event in D.C. in September.
5:44
Speaker 3: Wow. Time is like moving.
5:46
Speaker 1: It was a great event. Yeah.
5:47
Speaker 3: Yeah, it was great. It was great.
5:48
Speaker 1: It was 16 years ago, but it.
5:49
Speaker 3: Was a great event. It legitimately feels 16 years ago
5:52
Speaker 3: when I was a wee lad. Yeah.
5:54
Speaker 2: But we had Chairman Molinar there, which was awesome. It
5:57
Speaker 2: was the first time I got to actually interview him.
6:01
Speaker 2: And I asked sort of maybe the inverse of this question.
6:05
Speaker 2: And I asked sort of like, if coins was light
6:08
Speaker 2: on biotech or it seemed to largely spare the industry,
6:13
Speaker 2: would it create sort of more.
6:17
Speaker 3: Emphasis to advance Binza? And it was.
6:20
Speaker 2: Interesting because at first, Chairman Molinar sort of asked what
6:23
Speaker 2: I meant by that. Like, I think it was interesting
6:25
Speaker 2: that it seemed, you know, and obviously he's working on
6:28
Speaker 2: many things, but the sort of idea that like coins
6:30
Speaker 2: might sort of spare a lot of the dealmaking, I
6:32
Speaker 2: think it was, he just was like, well, what do
6:33
Speaker 2: you mean by it sort of, you know, dodges the deals?
6:37
Speaker 2: And so I sort of explained what had seemed to
6:39
Speaker 2: be some of the conventional thinking about where coins would land,
6:43
Speaker 2: and we'll get into why it's maybe a little bit
6:45
Speaker 2: harsher than that now.
6:47
Speaker 3: But he essentially answered that he thought, yes, if.
6:49
Speaker 2: It was like light on biotech, you know, maybe Binza
6:53
Speaker 2: has sort of more room to gain some bipartisan momentum. Obviously,
6:59
Speaker 2: there are a ton of like variables there, especially like
7:03
Speaker 2: with a new Congress coming in.
7:05
Speaker 3: So then my answer to you is sort of based
7:06
Speaker 3: off the inverse.
7:07
Speaker 2: Well, if coins is now a little bit harsher, you know,
7:11
Speaker 2: I would sort of I'm almost sort of applying the
7:13
Speaker 2: congressman's same logic.
7:15
Speaker 3: And he didn't tell me this.
7:16
Speaker 2: So I'm, you know, inferring a little bit, but it
7:18
Speaker 2: might It might mean that there isn't quite the need
7:20
Speaker 2: to have it go through this robust regulatory process like
7:25
Speaker 2: a biosecure did, for example, which was a little bit
7:28
Speaker 2: more novel in what it was trying.
7:30
Speaker 3: To do.
7:32
Speaker 2: Than what Binza would do because biotech. And as we'll
7:35
Speaker 2: get into, maybe some kinds of deals and investments are
7:39
Speaker 2: included in the draft regs.
7:40
Speaker 1: So let's get into it. We waited, we waited, we waited.
7:43
Speaker 1: Coins Act. And as a reminder, there are several Making
7:47
Speaker 1: Medicine episodes that we hope folks will check out if
7:49
Speaker 1: you want backgrounds. We had one about five myths as
7:53
Speaker 1: it relates to China. So check out those episodes. We're
7:55
Speaker 1: going to assume if you're joining this conversation, you know
7:59
Speaker 1: that an 160-so page rule dropped last week. What was
8:04
Speaker 1: your– we'll get into some specifics, but top line, what
8:07
Speaker 1: was your takeaway as it relates to the biotech provisions? Tough.
8:13
Speaker 3: That was my knee-jerk reaction.
8:15
Speaker 2: And I think like, you know, it required me to
8:17
Speaker 2: take a step back, I think, to sort of glean
8:19
Speaker 2: the nuance.
8:19
Speaker 3: And I think that really applies to all of us.
8:21
Speaker 2: But I think like at its face, you know, the
8:27
Speaker 2: fact that pharmaceutical compounds are mentioned as a prohibited.
8:32
Speaker 3: But it's not a prohibited transaction.
8:33
Speaker 2: It's like a prohibited I'm like blanking on the term,
8:36
Speaker 2: but basically like a prohibited product.
8:38
Speaker 1: Like you can a covered product, right?
8:40
Speaker 3: A covered product. Thank you.
8:41
Speaker 2: It includes, you know, drugs and medicines pretty much. Um,
8:46
Speaker 2: and they list some examples of which, you know, they include, uh,
8:50
Speaker 2: they being treasury include, you know, some of the major
8:53
Speaker 2: kinds of molecules that you would do deals for in China,
8:56
Speaker 2: cell and gene therapy, uh, being one small molecules, uh,
9:00
Speaker 2: protein recombinant therapies, monoclonal antibodies, um, So to me, that
9:06
Speaker 2: jumped out in terms of Treasury listing medicines as something
9:12
Speaker 2: that they're keeping an eye on and the deal flow.
9:15
Speaker 2: Licensing not being included was interesting, which we had sort.
9:20
Speaker 3: Of been hearing about.
9:21
Speaker 2: It's interesting, like seeing what the regs ultimately were and
9:23
Speaker 2: what the rumor mill was like in the lead up
9:25
Speaker 2: was fascinating. And I think gets into a little bit
9:28
Speaker 2: of the the nuance, the confusion, what's muddied still. But,
9:34
Speaker 2: you know, licensing was not mentioned explicitly as a transaction
9:39
Speaker 2: of concern or a prohibited transaction.
9:42
Speaker 1: Let's stay on licensing for a second because within, I mean,
9:46
Speaker 1: it came out Thursday afternoon. My phone was filled with,
9:49
Speaker 1: is licensing in, is licensing out? Is licensing in, is
9:52
Speaker 1: licensing out?
9:52
Speaker 3: I think I was one of those techs.
9:54
Speaker 1: I was like, Max, you can't be texting me this.
9:57
Speaker 1: I'm texting you this because you were in the room
10:01
Speaker 1: at Treasury. They had a little press briefing before. They
10:05
Speaker 1: had this all embargoed. And one of the reporters– it
10:09
Speaker 1: might have been you. I don't know.
10:10
Speaker 3: It was me.
10:11
Speaker 1: It was you asked Treasury– well, it's your story– Talk
10:16
Speaker 1: about asking Treasury explicitly about this, because I think this
10:19
Speaker 1: is a huge point of confusion that I want to unpack, like,
10:23
Speaker 1: just because the word's not in there, is it in there?
10:25
Speaker 3: Right.
10:26
Speaker 2: So, you know, in journalism, it's like, you kind of
10:30
Speaker 2: know what you, you know, when you have these opportunities,
10:32
Speaker 2: and this, I felt, first of all, I was really
10:33
Speaker 2: appreciative that they included me in the press briefing. But basically,
10:37
Speaker 2: you know, I was like, this is the question I have,
10:40
Speaker 2: this is the question the industry has. And again, so
10:44
Speaker 2: coins involves many different sectors. So I think there could
10:49
Speaker 2: have been people who were more curious about hypersonics or supercomputing,
10:53
Speaker 2: things like that. I mean, there's a lot of things
10:55
Speaker 2: you could have asked about. But for me, I was
10:57
Speaker 2: laser focused on the biotech question. And I had known
11:00
Speaker 2: that this was such a centerpiece of the discussions that
11:03
Speaker 2: people had had with Treasury over the summer. So I
11:05
Speaker 2: was like, let me just try and get this official
11:07
Speaker 2: on the record about it. And again, because so much
11:10
Speaker 2: of the rumor mill leading up to the regs.
11:12
Speaker 3: Involved whether licensing was in or not.
11:15
Speaker 2: So I asked and was told pretty definitively that licensing
11:19
Speaker 2: wasn't included in these regulations. And then I followed up with, well,
11:26
Speaker 2: what about like co-development and co-commercialization regulations?
11:30
Speaker 3: Deals. And you and I are about to get.
11:32
Speaker 2: Into this, to which I was told, I'll let the
11:35
Speaker 2: rule speak for itself, but licensing is not included.
11:42
Speaker 3: And as you and I now know....
11:46
Speaker 2: And this is why it's kind of funny is like
11:47
Speaker 2: the rule doesn't really speak for itself.
11:49
Speaker 1: I was going to say, does it speak for itself?
11:52
Speaker 3: Go on.
11:54
Speaker 2: The rule does not at all actually speak for itself
11:57
Speaker 2: on that front. You and I right now are speaking
12:00
Speaker 2: for the rule actually right now.
12:02
Speaker 1: Well, and when I talk to you right after the
12:05
Speaker 1: reg drop. You gave an interesting analogy and we can
12:08
Speaker 1: take it out of the episode.
12:10
Speaker 3: This is probably wrong in hindsight, but yeah.
12:11
Speaker 1: Well, exactly. So we can take this out of the
12:13
Speaker 1: episode if you prefer.
12:15
Speaker 3: No, you got to keep in my gaffe, please.
12:18
Speaker 1: We talked about, okay, it doesn't explicitly prohibit this thing
12:23
Speaker 1: that from Incubate's perspective is a positive. And we'll get
12:28
Speaker 1: into why it's positive for patients and positive for the
12:32
Speaker 1: economic cycles of someone else is really innovating and doing
12:37
Speaker 1: interesting things. And we're saying, hey, we want to take
12:39
Speaker 1: it and move it along in the cycle. We'll come
12:41
Speaker 1: back to that. But your gut reaction was, look, with 10,000
12:50
Speaker 1: lawyers behind you, you might still be able to buy
12:53
Speaker 1: stuff in China, but the shelves are going to be
12:57
Speaker 1: bare because so much stuff will be limited. So Yes,
13:02
Speaker 1: you can still maybe potentially license, but what are you
13:05
Speaker 1: going to license because the underlying mechanics of the rule
13:09
Speaker 1: make that impossible? Is that still your– the analogy just
13:14
Speaker 1: really stuck out to me.
13:15
Speaker 2: Yeah, that was– Look, I'm going to always stand on
13:21
Speaker 2: my hot takes in the moment, but I think in hindsight,
13:24
Speaker 2: I would add some more nuance to it. And I
13:27
Speaker 2: think just so everyone knows exactly, I was like, I
13:29
Speaker 2: think I said, it's like going into a Target and
13:32
Speaker 2: you can spend money, but yeah, there's nothing on the shelf.
13:35
Speaker 2: I use the Target specifically. But no, I mean, I
13:40
Speaker 2: think that there's definitely a kind of licensing deal that
13:43
Speaker 2: is totally permitted still. And ironically- Before Thursday ended, Gilead
13:51
Speaker 2: announced a $ 1. 3 billion upfront deal for an immunology drug
13:57
Speaker 2: from a Chinese biotech. And it was pretty pure play.
14:01
Speaker 2: And again, I would love if a lawyer was here
14:03
Speaker 2: to say no. But I've sort of brought it up
14:05
Speaker 2: in conversations. And I think this is the exact kind
14:08
Speaker 2: of deal that's going to be allowed to continue, which
14:11
Speaker 2: is specifically a single asset with an upfront payment. And,
14:17
Speaker 2: you know, for X greater China rights and you pay
14:21
Speaker 2: some royalties on that, that feels pretty strict, like pretty,
14:25
Speaker 2: pretty clearly still allowed within the draft context and and
14:28
Speaker 2: fits pretty squarely in like licensing as I think Treasury
14:32
Speaker 2: sort of intended. So I would I would definitely like
14:35
Speaker 2: take my foot off the gas of that original metaphor
14:37
Speaker 2: that like nothing is on the shelf.
14:41
Speaker 3: But there's.
14:43
Speaker 2: You know, there is a kind of collaboration that I
14:46
Speaker 2: think has gotten more popular, which is multi-asset, some element
14:52
Speaker 2: of co-development or some element of co-commercialization, maybe more knowledge
14:58
Speaker 2: sharing than just let me get your product. I'll take it.
15:01
Speaker 3: You have your rights. We don't really, you know, we
15:04
Speaker 3: go about our own business separately.
15:06
Speaker 2: That I think might be more included in these regs.
15:10
Speaker 1: Well, and let's stay there because from your vantage point,
15:13
Speaker 1: is that where the trend was going? Absent of coins,
15:18
Speaker 1: you had old school licensing. I want rights in these
15:21
Speaker 1: six countries and you take Japan and we'll take the
15:24
Speaker 1: EU and we'll take the US. Obviously, the US being
15:28
Speaker 1: the most important market was always the big one. Those
15:32
Speaker 1: bright lines, this asset, I'm going to sell it for you.
15:36
Speaker 1: Here are some terms you might get. for both the
15:39
Speaker 1: upfront and then royalties. But the trending stuff and maybe
15:44
Speaker 1: the more innovative stuff, would you say was moving more
15:47
Speaker 1: towards let's jointly do some of this stuff together? And
15:51
Speaker 1: so does the rule almost fly in the face of
15:55
Speaker 1: where the market was taking co-development or do you think
15:58
Speaker 1: that's too strong?
16:00
Speaker 3: I think that's fair.
16:01
Speaker 2: And I would also say that's fair because You have
16:05
Speaker 2: to put it in the context of what the Chinese
16:07
Speaker 2: government has just recently said about where it wants its
16:10
Speaker 2: pharmaceutical sector to go. So I don't know how it
16:12
Speaker 2: behooves the Chinese biotech market to sort of only stay
16:16
Speaker 2: within the very kind of limited confines of selling rights
16:20
Speaker 2: to medicines that they innovate and identify there, only to
16:27
Speaker 2: just give up rights and get money. Like, yes, you're
16:30
Speaker 2: sort of growing... Like you're obviously adding capital and you're
16:34
Speaker 2: still sort of attracting other, you know, foreign investors. Like
16:39
Speaker 2: you're still sort of benefiting the sort of maturity, but the.
16:45
Speaker 3: Companies there aren't really able to grow.
16:48
Speaker 2: Like they're still sort of stunting their progress if like,
16:51
Speaker 2: the co-development can't happen. And so this is where I'm
16:56
Speaker 2: just sort of like hypothesizing. So I would take it
16:58
Speaker 2: with a grain of salt. But like, I would imagine
17:00
Speaker 2: that as sort of, especially some of the larger pharmaceutical
17:04
Speaker 2: companies in China grew, like think the hang guys of
17:07
Speaker 2: the world, like they realized that they had, you know,
17:10
Speaker 2: some more bargaining chips, especially as larger pharmaceutical companies have
17:16
Speaker 2: needed to fill some major patent holes.
17:18
Speaker 3: Like there's a, so what makes.
17:20
Speaker 2: This such an interesting topic to cover is all of
17:23
Speaker 2: the levers that have allowed, not even allowed, but like
17:27
Speaker 2: have sort of helped the China biotech ecosystem flourish. Like
17:31
Speaker 2: it's been better value. They've gotten better at their chemistry.
17:35
Speaker 2: companies have needed them. They've tried to save money where
17:38
Speaker 2: they could like some, you know, other MNA has been
17:42
Speaker 2: quite pricey. And so maybe you have to like spend,
17:44
Speaker 2: it's just like all of these things make it why
17:47
Speaker 2: we're here really. And so I would say, yeah, I
17:50
Speaker 2: would agree. Like, I do think that what might be
17:53
Speaker 2: ensnared in the draft rules. And again, obviously there's going
17:56
Speaker 2: to be a vigorous public comment period now.
17:59
Speaker 3: And I, this certainly is not going to be like
18:01
Speaker 3: where these stand.
18:03
Speaker 2: We'll see, I guess, but like, It definitely is trying
18:06
Speaker 2: to address, I think, where the ball was moving in
18:09
Speaker 2: terms of collaborations.
18:12
Speaker 3: And I think that's why it's really gotten a lot
18:15
Speaker 3: of interest.
18:16
Speaker 1: Well, and I think that's where I would caution, and
18:19
Speaker 1: I'm sure Incubate's comments will, is we'll caution Treasury of
18:22
Speaker 1: you are flying in the face of the market. And
18:25
Speaker 1: there are times to do that. And we're not pretending
18:28
Speaker 1: there's no national security concerns across all the coins industries.
18:34
Speaker 1: but we want to make it really clear. And I
18:37
Speaker 1: think Treasury gets this because, and you called this out
18:41
Speaker 1: in your article, buried deep within the regs. So you've
18:44
Speaker 1: got all these different sections, one of which is biotech. Uniquely,
18:49
Speaker 1: the biotech section called out that as proposed, these rules
18:56
Speaker 1: could cause harm to U.S. public health as well as U.S. companies.
19:02
Speaker 1: Did that I mean, you included in your article, does
19:06
Speaker 1: that stand out to you? Like, hey, we're proposing these rules,
19:09
Speaker 1: but we also want to caution this could harm U.S.
19:12
Speaker 1: public health and harm economic strength?
19:15
Speaker 2: Yeah, I was generally surprised and interested in how much
19:20
Speaker 2: Treasury seems to almost be pleading for reasons to walk
19:27
Speaker 2: some of this back. Like, The comments, whether it was
19:32
Speaker 2: that one, sort of just others about like, you know,
19:36
Speaker 2: should we narrow what pharmaceutical compounds mean? Like, it just
19:39
Speaker 2: seemed like Treasury is really looking for industry to sort of,
19:44
Speaker 2: you know, maybe steer the course on a finalized rule. Now, obviously, like,
19:48
Speaker 2: as you well know, like industry, I wouldn't say it's
19:52
Speaker 2: a 50-50 divide. I actually definitely wouldn't say that. But like,
19:55
Speaker 2: there are parts of industry that are clamoring for coins.
19:59
Speaker 2: So industry, and I've tried to be careful when I write, like,
20:02
Speaker 2: it's not capital I industry, you know, like, and so
20:06
Speaker 2: I've had to sort of delineate a little bit that
20:08
Speaker 2: there are that there are folks who are concerned about
20:12
Speaker 2: the capital outflow to China as it pertains to investments domestically,
20:18
Speaker 2: whether that's through M & A, early stage capital for
20:24
Speaker 2: biotechs to help them get off the ground, Series A, B,
20:28
Speaker 2: and things like that, R & D.
20:32
Speaker 3: Labs, things like that.
20:34
Speaker 2: I think it's just important to sort of caveat with
20:37
Speaker 2: that But it definitely struck me that Treasury seems to
20:40
Speaker 2: be asking explicitly, you know, for reasons to walk some
20:45
Speaker 2: of this back or to narrow it, I guess is
20:47
Speaker 2: maybe the better way to phrase it. Like, I think
20:49
Speaker 2: they this is broad. I mean, they like when I
20:54
Speaker 2: keep going back to sort of the joint ventures thing
20:56
Speaker 2: and like, well, that's sort of really what we're talking
20:59
Speaker 2: about here. Right. Is like, what is joint venture mean
21:01
Speaker 2: as it pertains to this particular kind of transaction?
21:04
Speaker 3: Right.
21:05
Speaker 2: Where there's potentially co-development or co-collaboration in some form, does
21:10
Speaker 2: that constitute a joint venture? Using the plain English meaning
21:15
Speaker 2: of the term, I was like, it just felt very
21:18
Speaker 2: like judicial, like very much like what you would find
21:20
Speaker 2: in a court docket.
21:22
Speaker 3: And I thought that was funny.
21:23
Speaker 1: Well, and to that point, I think some of the
21:26
Speaker 1: definitional terms don't get defined.
21:31
Speaker 3: Purposefully, right?
21:32
Speaker 1: I mean, kind of- And I think if there's something
21:34
Speaker 1: we focus on that's not necessarily substantive, it's like, look,
21:39
Speaker 1: start capitalizing some terms and give us strict definitions because
21:44
Speaker 1: even the specter of uncertainty and prohibition by Treasury is
21:50
Speaker 1: going to spook investors. It doesn't actually have to mean
21:55
Speaker 1: every single joint venture concept is covered because But what
21:59
Speaker 1: we know from the investment side is no one wants
22:03
Speaker 1: to be the guy who finds out. And if it's
22:06
Speaker 1: possible that it's a covered prohibited transaction, it's going to
22:11
Speaker 1: be assumed as a covered prohibited transaction. And it feels
22:14
Speaker 1: like one of the things we have to have is
22:17
Speaker 1: a little more crisp. definitions. Did you see uncertainty in
22:24
Speaker 1: the draft?
22:25
Speaker 2: Totally.
22:25
Speaker 3: Yeah, totally.
22:26
Speaker 2: And again, it seems kind of purposefully broad because the
22:31
Speaker 2: Treasury wants feedback on how to narrow it. But also,
22:35
Speaker 2: what do we know, for better or for worse, about
22:39
Speaker 2: sort of a general tried and true.
22:40
Speaker 3: Strategy in the Trump admin?
22:43
Speaker 2: Get that headline out there and sort of tinker on
22:46
Speaker 2: the borders over time.
22:48
Speaker 3: And I think that's not like, That's not.
22:51
Speaker 2: One department specific. And so I think whether that was
22:58
Speaker 2: so concerted or not, we've seen this deployed, this kind
23:01
Speaker 2: of strategy deployed in different kind of policy arenas from
23:05
Speaker 2: the administration. And this felt sort of similar in that
23:08
Speaker 2: vein of broad, sweeping reg that upon first read and
23:14
Speaker 2: interpretation can be really read as like, this is going
23:17
Speaker 2: to clamp down on a major part of industry and dealmaking,
23:22
Speaker 2: or could at least, and really puts into stone a
23:29
Speaker 2: tough on China stance. And then over time, maybe as
23:34
Speaker 2: industry raises this issue or that issue, it's ultimately chiseled
23:38
Speaker 2: down to something a little bit more finite and specific.
23:42
Speaker 2: So it does seem strategically within, within those bounds, I
23:47
Speaker 2: guess I would say. And so I think like, that
23:49
Speaker 2: was another thing that my editor sort of raised after
23:51
Speaker 2: the fact is, you know, I had that analogy and
23:53
Speaker 2: I was like, well, okay, but I was like, all right,
23:55
Speaker 2: but the joint ventures, maybe some things are definitely still allowed. So,
23:58
Speaker 2: you know, it's like an iterative process where you're hearing
24:01
Speaker 2: from people and you're like, okay, this person makes a
24:03
Speaker 2: good point. And I feel like all day on Twitter
24:06
Speaker 2: on like Friday, I was like going back and forth
24:08
Speaker 2: with people who thought like, you know, there's a minimalist
24:11
Speaker 2: view too, right? Which is where, Because licensing isn't mentioned
24:14
Speaker 2: at all, you could reasonably interpret the kinds of deals
24:19
Speaker 2: that you and I are talking about as maybe potentially
24:21
Speaker 2: hampered as, no, they're fine, right? It's a licensing deal. Yes,
24:26
Speaker 2: you could construct it in a certain way that might
24:28
Speaker 2: fit within a joint venture, but if we're taking treasury
24:30
Speaker 2: at their word, it's a licensing deal. Yeah. Maybe we're
24:33
Speaker 2: all making a mountain out of a molehill, right? Like
24:35
Speaker 2: that's sort of another argument. The maximalist view, which I
24:38
Speaker 2: don't think is necessarily true either, is like, well, is
24:41
Speaker 2: a royalty a profit sharing, right? Like you could look
24:44
Speaker 2: at it the entire other way and be like, well,
24:47
Speaker 2: is even like the Gilead kind of deal like– Is
24:52
Speaker 2: that a joint venture? Because there's some element of like
24:54
Speaker 2: profit sharing. And I don't know if I would say that,
24:57
Speaker 2: and I also don't know if I would say, so
24:58
Speaker 2: I think it's like somewhere in the middle, but I
25:00
Speaker 2: think that muddiness is exactly like the point too, to
25:04
Speaker 2: some regard.
25:05
Speaker 1: Yeah. And I do think, and I want to get
25:08
Speaker 1: and credit the treasury team for their engagement process. I mean,
25:14
Speaker 1: in our experience with them, just thoughtful people putting this together.
25:19
Speaker 1: But there's another element, not necessarily within Treasury, but in
25:22
Speaker 1: the administration, as well as in Congress, the folks who
25:26
Speaker 1: really want this, not explicitly for biotech, but if you're
25:30
Speaker 1: a national security person and you believe China is a
25:35
Speaker 1: geopolitical adversary, and if you're on the China Select Committee
25:41
Speaker 1: and you believe that, or you're a China hawk, You
25:45
Speaker 1: want coins as broad as can be, and I think
25:48
Speaker 1: that's a– you've done some reporting on this that like
25:52
Speaker 1: Treasury is trying to craft this in a way that
25:55
Speaker 1: we can continue to dominate in these industries and whether
25:59
Speaker 1: that's keeping China at arm's length or taking advantage of
26:02
Speaker 1: China where possible. But this national security apparatus, do you
26:07
Speaker 1: think it's fair to say they're like as it relates
26:11
Speaker 1: to the regulatory construct, like the bigger, the better. And
26:15
Speaker 1: we'd rather hamper innovation than hit it with a broadsword
26:24
Speaker 1: and Treasury might be trying to take a scalpel out.
26:26
Speaker 2: I don't know if I would say that the national
26:28
Speaker 2: security apparatus is like trying to hamper innovation per se.
26:33
Speaker 2: I think I can understand why industry sort of reads
26:35
Speaker 2: the actions that way. Or at the very least, you
26:37
Speaker 2: could say like, maybe they're risking- this sort of innovative
26:42
Speaker 2: engine in favor of, you know, a more clamped down
26:47
Speaker 2: sort of national security stance. I think if, and I
26:50
Speaker 2: wouldn't speak for them, but I think like folks more
26:52
Speaker 2: in that circle would say like, we're not trying to
26:55
Speaker 2: limit innovation, we just are trying to put more restrictions
27:00
Speaker 2: on capital outflow so it doesn't flow to, you know,
27:04
Speaker 2: what they would say is like an economic adversary. You know,
27:10
Speaker 2: The dynamic, though, has been over the summer that the
27:15
Speaker 2: folks in the industry who are looking for broader coins
27:18
Speaker 2: and are looking for more restrictions are appealing to the
27:20
Speaker 2: national security wing. And the people who have been– and
27:25
Speaker 2: some of those folks have also met with Treasury. The
27:29
Speaker 2: folks who are trying to appeal to Treasury to not
27:33
Speaker 2: sort of place their finger on the scales of the
27:35
Speaker 2: marketplace– have sort of been making that pitch. You know,
27:38
Speaker 2: you and I have talked about sort of Europe as
27:40
Speaker 2: sort of another talking point in most often sort of
27:44
Speaker 2: an anti-coin sentiment of like, well, if you sort of
27:48
Speaker 2: limit US access to Chinese innovation, they're gonna find another
27:52
Speaker 2: marketplace to go to, to once again, kind of grow
27:55
Speaker 2: the ecosystem as it's sort of a national priority now
27:59
Speaker 2: in China to grow the pharmaceutical sector. Like they're gonna
28:02
Speaker 2: find inroads elsewhere, I think has been a fair point
28:05
Speaker 2: raised by others. Um, but yeah, I mean, I think that,
28:09
Speaker 2: I think let's, let's, let's sort of bring it back to,
28:12
Speaker 2: to like what has been happening. I think whether that's
28:15
Speaker 2: been intentional or not, or unintentional, like the, the press releases,
28:20
Speaker 2: like just the news flow about the Capitol going into China,
28:24
Speaker 2: I think has gotten the attention of Washington. Um, you know, and, and, and,
28:30
Speaker 2: and I can tell you for a fact, like, you know, the,
28:32
Speaker 2: the China select committee reads all those stories. They see
28:35
Speaker 2: every headline. you know, from the major pharmaceutical companies when
28:38
Speaker 2: they strike, you know, these, these massive deals. And, and
28:41
Speaker 2: I know, you know, you know, you and I sort
28:43
Speaker 2: of talked about like.
28:44
Speaker 1: I've got to insert my disclaimer here.
28:46
Speaker 3: Pop it in. I know it's, I literally know it's coming.
28:48
Speaker 3: Hit me with it.
28:50
Speaker 1: You have been better than most in media. Um, And
28:54
Speaker 1: we put this in our China myths episode that the
28:58
Speaker 1: big headline number is not a real number. It's bio bucks.
29:02
Speaker 1: And if all that money actually materialized, we'd be having
29:06
Speaker 1: hundreds of new drugs come to patients, not to mention
29:09
Speaker 1: economic growth out of this industry that we've never seen before.
29:11
Speaker 1: So do you think that happens is they see the
29:18
Speaker 1: $ 15 billion number and honestly the policymaker thinks– $ 15 billion
29:25
Speaker 1: is going to China tomorrow, like in a briefcase, because
29:30
Speaker 1: then that tells us we have so much more education
29:32
Speaker 1: to do that. Look, if all these things materialized, if
29:35
Speaker 1: $ 120 billion this year actually went to China. it would
29:41
Speaker 1: mean that 100 out of 100 assets ended up being
29:47
Speaker 1: blockbuster drugs. So how do we break through that noise?
29:50
Speaker 1: Because you have done a better job. I will say
29:52
Speaker 1: some of your media peers should double check those press
29:55
Speaker 1: releases a little bit.
29:57
Speaker 3: It's hard.
29:59
Speaker 2: Well, first of all, I would say, again, I want
30:01
Speaker 2: to give maybe these folks a little bit more credit.
30:03
Speaker 2: I don't think that they sort of think it's $ 15
30:06
Speaker 2: billion going to China. I think the thing that jumps
30:09
Speaker 2: off the page in these press releases is when it's
30:11
Speaker 2: those kinds of deals. that have been announced this year,
30:15
Speaker 2: it comes often with a co-development or a co-commercial stipulation.
30:19
Speaker 2: So I think that's maybe what gets a little bit
30:22
Speaker 2: more highlighted and bolded from policymakers. It's not like raw
30:27
Speaker 2: dollar amounts or potential top line figures. You know, and this,
30:33
Speaker 2: you and I have gone back and forth. I think
30:34
Speaker 2: it's the one area where I see your point. I
30:38
Speaker 2: see other points. You've got to see all the points.
30:41
Speaker 3: Yeah, right.
30:42
Speaker 2: I mean this has been a fun– it's been a
30:43
Speaker 2: really fun journalism exercise, this whole topic, because it's quite
30:48
Speaker 2: divided and I have no genuine opinion on it. But
30:53
Speaker 2: I think like this– that kind of deal does exist
30:56
Speaker 2: in other ways too. I mean there's a lot of
30:57
Speaker 2: M & A that happens now with like contingent value rights.
31:00
Speaker 2: So like– value baked in in the latter half or
31:04
Speaker 2: contingent on success exists in other deals.
31:06
Speaker 3: And it doesn't, you know, it doesn't.
31:09
Speaker 2: Necessarily mean that a, the company isn't hoping for, you know,
31:14
Speaker 2: I think like the point of the bio bucks is like, yes,
31:16
Speaker 2: it's not money coming to fruition now, but theoretically, you know,
31:20
Speaker 2: if some of those assets hit, it is going to
31:22
Speaker 2: be more money flowing and it's usually baked in good value.
31:27
Speaker 3: Hence why it's sort of based on something.
31:29
Speaker 1: So like, yeah.
31:30
Speaker 3: Yeah.
31:31
Speaker 2: Just based off historical context, even if a company is
31:36
Speaker 2: having great success, it's not going to hit on all
31:38
Speaker 2: of its biobucks and all these molecules aren't going to
31:40
Speaker 2: pan out. And even if they are, maybe a company
31:43
Speaker 2: just decides which ones to take forward and which to not.
31:45
Speaker 2: But they exist for a reason, which is it's usually
31:48
Speaker 2: good value for the payer to have these follow-on molecules
31:54
Speaker 2: that could be coming and, oh, all you owe then
31:56
Speaker 2: are sort of you know, milestone payments, instead of having
31:59
Speaker 2: to pay some big upfront later, once XYZ molecule has
32:03
Speaker 2: accrued phase one or phase two or phase three data, like,
32:07
Speaker 2: you know, to state the obvious as a drug accrues
32:10
Speaker 2: more data, successful data that it becomes more valuable. So like,
32:14
Speaker 2: you know, I think the biobucks benefit the companies is,
32:18
Speaker 2: you know, it's like, I don't know, I sort of,
32:20
Speaker 2: I wouldn't, I think we're careful about putting that top
32:23
Speaker 2: line number there. And I'm sure policymakers are aware of it,
32:26
Speaker 2: but I don't think it's, it's like abhorrent to focus
32:29
Speaker 2: on that number as an expression of value.
32:33
Speaker 3: That these companies have shown in a China biotech. That
32:35
Speaker 3: would be sort of my, my.
32:37
Speaker 1: Gosh, you should move to Switzerland. What diplomacy?
32:41
Speaker 2: I literally, I am the, I am the Swiss of this.
32:44
Speaker 2: I feel like I'm aspire to be the Geneva of
32:46
Speaker 2: this story.
32:48
Speaker 1: I find it abhorrent, but I will, I will take
32:50
Speaker 1: that one.
32:51
Speaker 3: Fair enough. Fair enough. I get your point though. I
32:53
Speaker 3: get your point, right?
32:54
Speaker 1: Like, you know, but, But you mentioned a good point
32:57
Speaker 1: of like basically these deals capture upside. And I've got
33:01
Speaker 1: two more questions. You've been super generous with your time. China,
33:07
Speaker 1: none of this is happening in a vacuum. And I
33:09
Speaker 1: think if there's another point we'll try to make is
33:12
Speaker 1: there are other chess pieces being moved around. One of
33:16
Speaker 1: them that you alluded to earlier is China is starting
33:19
Speaker 1: to restrict the upside. And so it's like it's kind
33:22
Speaker 1: of funny to see. One government is right here, either China,
33:27
Speaker 1: who is now taking steps to restrict the ability for
33:32
Speaker 1: their best and most promising assets to be taken advantage of,
33:36
Speaker 1: for lack of better words, but leaving a big enough
33:39
Speaker 1: caveat for global biopharma companies to come in. And the
33:43
Speaker 1: US is saying, well, we're going to restrict you on
33:46
Speaker 1: going in. And so both of them are taking these
33:49
Speaker 1: defensive postures and And only one of them it feels
33:53
Speaker 1: like can be right. So you alluded to that. So
33:55
Speaker 1: I want you to just share any thoughts on China.
33:58
Speaker 1: But then also Europe and Japan, these two places that
34:02
Speaker 1: have fallen behind and now frankly won't have their arms
34:05
Speaker 1: tied behind their back. Europe's– Europe had the opportunity to
34:10
Speaker 1: do coins and implement it for biotech and they explicitly
34:14
Speaker 1: passed in their legislation saying, yeah, yeah, yeah. Keep– this
34:19
Speaker 1: is how we get back in the game. I think
34:21
Speaker 1: Japan's maybe less explicit about it. So how do you
34:26
Speaker 1: see other– we're so US-centric. US biotechs are for or
34:30
Speaker 1: against it. US venture, for or against it. How do
34:33
Speaker 1: you see those other characters shaping the actual reality of–
34:38
Speaker 1: where drugs are going to come from in five years.
34:40
Speaker 2: Oh, man, I will really caveat this by saying, I
34:43
Speaker 2: think this is the part of the discussion that I
34:45
Speaker 2: sort of am the biggest dummy on, like in terms
34:47
Speaker 2: of like, it's, you know, like, like it is, you could,
34:50
Speaker 2: you could really go down like a rabbit hole, like, well,
34:52
Speaker 2: this could do this, could do this, could do this,
34:53
Speaker 2: at least, at least particularly on the question about like, well,
34:56
Speaker 2: what is China do next? You know, because then I
34:58
Speaker 2: think it, and I mentioned this when I, Drew and
35:00
Speaker 2: I were talking on Friday is like, who's to know
35:02
Speaker 2: whether this, this meaning biotech and biotech regulations is just
35:06
Speaker 2: one domino in the broader trade conversation with China, you know,
35:11
Speaker 2: like of these other sectors included with coins. So, so
35:14
Speaker 2: that's sort of in the back of my head as
35:15
Speaker 2: well as like, once you get into a conversation of like, well,
35:19
Speaker 2: how does this play in this sort of chess match?
35:21
Speaker 2: It's like, well, then you have to add all the
35:22
Speaker 2: pieces onto the chess table and it's not just this
35:25
Speaker 2: sector and this industry and this regulation. So I, I
35:28
Speaker 2: would sort of couch with that. I mean, I think
35:31
Speaker 2: to your point, China has already sort of demonstrated it's
35:35
Speaker 2: willing to put some restrictions on. They passed similarly from
35:42
Speaker 2: excluding licensing deals.
35:45
Speaker 3: Oh, well, sorry.
35:45
Speaker 2: They did exclude licensing deals from some new rules from
35:49
Speaker 2: their Ministry of Commerce on some export restrictions. And they
35:52
Speaker 2: focused on pure tech transfers, which again, amorphous, right? Like
35:57
Speaker 2: sort of left sort of wondering what that is. You know,
36:00
Speaker 2: I guess you could imagine like, probably China doesn't want
36:03
Speaker 2: a Western company buying an entire biotech there, right? Like
36:07
Speaker 2: we've sort of had these jokes in the newsroom of like, well,
36:09
Speaker 2: does BMS like merge with Hengri? Like, or does that
36:11
Speaker 2: like really, I feel like that sort of puts the
36:13
Speaker 2: kibosh on that, you know, from now our regulations and
36:17
Speaker 2: China's regulations, I guess, at least to the degree that,
36:21
Speaker 2: you know, any China biotech has siRNA technology and cell
36:26
Speaker 2: and gene therapy, which was the restricted tech. So to
36:29
Speaker 2: your point, like they've already proven that they're willing to
36:33
Speaker 2: sort of.
36:35
Speaker 3: Put their own.
36:35
Speaker 2: National security spin on biotech regulations. The question now is
36:39
Speaker 2: whether they go a step further and do anything that
36:42
Speaker 2: seems more in the licensing or asset deal play, because
36:47
Speaker 2: I don't think that that was any of the takeaways
36:49
Speaker 2: from the restrictions they put on. And then Europe and Japan,
36:54
Speaker 2: it's a tough one to discern where the validity to
37:01
Speaker 2: the argument. Cause I just, I've heard this, I've heard,
37:02
Speaker 2: I've heard both talking points on this so much that
37:05
Speaker 2: I'm like trying to sort of suss out.
37:07
Speaker 1: That's us always in your ear, always in your ear,
37:10
Speaker 1: but it's, you know, but.
37:12
Speaker 2: You know, then you have the folks who are sort
37:13
Speaker 2: of more in favor of coins who sort of have
37:15
Speaker 2: this counterpoint to the, to the Europe argument, which is like,
37:19
Speaker 2: I think, I think there is some truth to both.
37:21
Speaker 2: One is if, if you only are thinking about like,
37:27
Speaker 2: China biotech's ascension through capital and revenue, which is not,
37:32
Speaker 2: I think, an unfair way to look at it. But
37:33
Speaker 2: if you are only looking at it through that way,
37:35
Speaker 2: then I think people are right to say, well, these
37:38
Speaker 2: drugs would have to access the US market for maximal
37:42
Speaker 2: revenue gain. If you're thinking about it more from a
37:46
Speaker 2: strategy standpoint and what they could do to grow themselves
37:50
Speaker 2: as businesses, then you could say, well, just by accessing Europe,
37:54
Speaker 2: not only would they add a new revenue stream, it
37:56
Speaker 2: would be materially smaller than accessing the U.S., but they
38:00
Speaker 2: would gain a bit of an understanding about market access,
38:02
Speaker 2: negotiating with the EU, negotiating with member countries, and they
38:07
Speaker 2: would gain in that as well, even if it wasn't
38:09
Speaker 2: then sort of the same level of know-how of sort
38:13
Speaker 2: of navigating the U.S. 's private market and insurers and PBN.
38:16
Speaker 2: I mean, there's a whole nother... So I think it's
38:20
Speaker 2: this isn't the, you know, this isn't the best, no
38:22
Speaker 2: one wants like a, it's, it's a little bit of
38:24
Speaker 2: both answer, but I do think that's, that there's some
38:26
Speaker 2: truth to both in a way. Like, you know, would,
38:29
Speaker 2: would Europe gain access to these medicines and the U
38:32
Speaker 2: S wouldn't? Sure. You know, I think it would, the,
38:36
Speaker 2: the level of severity of that access would probably depend
38:39
Speaker 2: on the kind of technology and the disease area in
38:44
Speaker 2: terms of like impact on U S patients.
38:47
Speaker 1: Well, one of your incredible colleagues, uh, covered in MFN's story,
38:51
Speaker 1: which we won't belabor here, but basically a.
38:55
Speaker 3: Shout out Maggie.
38:56
Speaker 1: Yeah, I mean, like we said, Grace said she had
39:00
Speaker 1: a favorite reporter at Endpoints. I love all Endpoints reporters.
39:04
Speaker 3: That's right. That is the right answer. That's the right answer.
39:06
Speaker 1: They're all doing terrific work.
39:07
Speaker 3: You love the newsroom.
39:08
Speaker 1: Well, and she covered, I can't remember which company, I
39:12
Speaker 1: think it was Roche, rethinking its strategy based on MFN
39:17
Speaker 1: of when it's going to launch in Europe. All that
39:19
Speaker 1: to say is I feel like some people who are
39:23
Speaker 1: pro-coins push this narrative of electric vehicles and cars and
39:29
Speaker 1: it under … Germany and now all the cars in
39:32
Speaker 1: Europe are Chinese. Setting that aside, that shows that Europe,
39:40
Speaker 1: particularly at a very challenging time with actual hot wars–
39:46
Speaker 1: does have an affinity for buying innovation out of China.
39:51
Speaker 1: And like, if you're going to go, if you believe
39:55
Speaker 1: that walling off China is in some way a national
39:58
Speaker 1: security strategy, you've got to bring along the rest of
40:02
Speaker 1: the developed world because we also know that China will
40:06
Speaker 1: just do fast follow drugs on any innovation in the US.
40:09
Speaker 1: And like, I see a world 10 years down where
40:12
Speaker 1: we have isolated ourselves and And now China does a
40:16
Speaker 1: fast follow and sells it to Europe and Japan. And
40:18
Speaker 1: now you throw in MFN, they don't need to buy
40:22
Speaker 1: from U.S. manufacturers. Like, it just feels like a stepping
40:25
Speaker 1: stone in a way to where the rest of the,
40:30
Speaker 1: you add in MFN, you add in everything else, and
40:33
Speaker 1: we see a great re-leveling. And that leveling is not U.S. leadership.
40:38
Speaker 1: And it just feels like, this in contribution with other
40:44
Speaker 1: things goes in the wrong direction.
40:45
Speaker 2: But can I just ask, so this is, Roche is
40:47
Speaker 2: a great example, like a Roche or a Novartis or
40:49
Speaker 2: an AstraZeneca, the European companies, because this is where I
40:52
Speaker 2: haven't really understood the full end point of that argument,
40:55
Speaker 2: which is like those companies, yes, they are European based,
41:01
Speaker 2: but they make their money in the US just like
41:03
Speaker 2: a Pfizer, a BMS or a.
41:05
Speaker 3: J & J.
41:06
Speaker 2: So I still like, like, I guess if I played
41:08
Speaker 2: this out, then I'm envisioning some world where like, any
41:12
Speaker 2: of the large companies, regardless of whether they're based in
41:16
Speaker 2: Europe or not, almost would have these like Europe only
41:20
Speaker 2: pipelines or like Europe only drugs that are sort of
41:25
Speaker 2: originating from China that don't access. And then they have
41:27
Speaker 2: like separate pipelines that are meant for the US market
41:30
Speaker 2: because they're not under some sort of coins. You know,
41:33
Speaker 2: it's like I play it out and I don't exactly
41:35
Speaker 2: see how it manifests in like a full, fully fledged
41:40
Speaker 2: business model.
41:41
Speaker 3: But I guess, like, I understand it from an access standpoint, right?
41:44
Speaker 2: Like Europe would be able to access these, but I'm
41:48
Speaker 2: still trying to figure out what it would behoove a
41:49
Speaker 2: company to only then sell it in Europe. And then
41:55
Speaker 2: that's like, I don't know, that's where I get lost
41:57
Speaker 2: in the argument.
41:58
Speaker 1: It's, and my point is not about European manufacturers, because
42:02
Speaker 1: I think my take, and this is somewhere that's a
42:04
Speaker 1: little beyond what we've lasered in on, is I don't
42:10
Speaker 1: know that I view European headquarter companies, by the way,
42:13
Speaker 1: getting preferential treatment out of this coin stuff. I mean,
42:17
Speaker 1: my general read is the large manufacturers because of their
42:21
Speaker 1: investments in the US are kept up. My point is
42:24
Speaker 1: more on the access side. And I suppose it's, if
42:29
Speaker 1: MFN is to be successful, it is a downward, and
42:34
Speaker 1: let's just call price controls.
42:36
Speaker 3: If U.S.
42:37
Speaker 1: Policymakers continue to embrace price controls with downward pressure on U.S. prices,
42:44
Speaker 1: the Trump administration's foreign posture, which I think is a
42:48
Speaker 1: good one, on other countries paying more, the delta ever
42:53
Speaker 1: so slightly begins to close. And at some point, is
42:57
Speaker 1: there a tipping point where if you're not launching in
43:04
Speaker 1: the EU or Japan, does the drug lag in Japan
43:09
Speaker 1: get strong enough that they just say to a Chinese
43:13
Speaker 1: future date global biopharma company, we really like this type
43:18
Speaker 1: of inhibitor. Do you think you could make this type
43:21
Speaker 1: of inhibitor? And you do have two pipelines. I mean,
43:25
Speaker 1: I don't see how you don't read coins as a
43:28
Speaker 1: two pipeline world. This is one of the myths we're
43:31
Speaker 1: concerned about. Americans innovating for Americans. That's not how science works.
43:36
Speaker 1: And so I think that's more my concern. And if
43:39
Speaker 1: this was a seven-hour episode with a cocktail mixed in,
43:42
Speaker 1: we could probably get to.
43:43
Speaker 3: The bottom of it.
43:45
Speaker 2: I think that's a super fair point. And I think
43:47
Speaker 2: that's the one worth sort of interrogating as well. you know,
43:50
Speaker 2: maybe a potential future. Man, I wish we had like
43:53
Speaker 2: a whole nother hour because we haven't even talked about,
43:55
Speaker 2: I mean, it's funny because incubate represents, you know, sort
43:58
Speaker 2: of the VC world. And there's a whole, I mean,
44:00
Speaker 2: there are so many other ways to perceive coins outside
44:03
Speaker 2: of the joint venture from a dealmaking perspective. And this
44:08
Speaker 2: is sort of some of the conversations I've been having
44:09
Speaker 2: with people and not to like leave us with an
44:11
Speaker 2: open-ended question, but it's like Greenfield Investments, You know, like
44:15
Speaker 2: things about, I mean, you look at the size of
44:18
Speaker 2: some of the workforces of large pharmaceutical companies in China,
44:24
Speaker 2: and also maybe some of the plans of venture capital
44:26
Speaker 2: groups to invest in China. I mean, those are things
44:29
Speaker 2: that we are, I think, veering, that might be more
44:32
Speaker 2: squarely and like, you can ask in the public comments,
44:35
Speaker 2: but I don't know how much that's going to change.
44:37
Speaker 3: Like, I think, so it's interesting.
44:39
Speaker 2: Yeah.
44:39
Speaker 1: It's a great call-out, and I don't know how to
44:42
Speaker 1: get to the bottom. We don't know where it's going
44:45
Speaker 1: to be in 10 years. I am a huge believer
44:48
Speaker 1: in the bright minds, not just in Kendall Square in
44:51
Speaker 1: the Bay Area, but we've got brilliant scientists doing incredible things.
44:57
Speaker 1: But so does China, and they have a lot of them.
45:02
Speaker 1: And this– the next half generation of those scientists– Who
45:07
Speaker 1: knows what they're going to come up with? And there's
45:11
Speaker 1: more to unpack there about IITs and do they have–
45:15
Speaker 1: they don't have the restrictions that we have and maybe
45:18
Speaker 1: we can fix some FDA reforms. But we don't know
45:22
Speaker 1: what technology is going to come out of homegrown Chinese
45:26
Speaker 1: innovation next and are we really saying we don't want it,
45:29
Speaker 1: which is where I want to leave because I rewatched
45:31
Speaker 1: our old episode where we had you on months ago
45:34
Speaker 1: and you were kicking this on and Everything you said
45:37
Speaker 1: panned out. You fare very well. But towards the end
45:42
Speaker 1: of the episode, we kind of talked about the ethical
45:45
Speaker 1: quandary here. And Treasury, I think, has been very clear.
45:48
Speaker 1: They are not here. Their statute and instructions are not
45:55
Speaker 1: to necessarily consider the U.S.
45:57
Speaker 3: Patient.
45:58
Speaker 1: I applaud them for putting in the line around public health.
46:01
Speaker 1: But you raised on the last episode, there is an
46:04
Speaker 1: ethical quandary if if your mission is to get new
46:08
Speaker 1: medicines to patients faster, how can you square that with
46:14
Speaker 1: a slow down the Chinese mentality that we see in coins?
46:18
Speaker 1: And I wonder if you've had more time to reflect
46:21
Speaker 1: on that or if you feel like the regs or
46:24
Speaker 1: the people you talk to, is that still out there
46:27
Speaker 1: about what this means to an American patient? And does
46:29
Speaker 1: an American patient really care where next gen Keytruda comes from? Like,
46:36
Speaker 1: Have you had thoughts on that?
46:37
Speaker 2: It's hard to answer, not because I don't think that
46:40
Speaker 2: there is still some truth in sort of thinking about
46:45
Speaker 2: just the public health ethics of restricting access to medicines by,
46:49
Speaker 2: you know, just region. you know, I know that like
46:53
Speaker 2: industry wouldn't want to hear this answer, but I think like,
46:56
Speaker 2: you know, you could then bring up the question of like, well,
46:59
Speaker 2: what is the ethics of the price of medicines generally,
47:02
Speaker 2: even when you have access to them? I mean, it
47:04
Speaker 2: becomes a Pandora's box that I don't think everyone, right?
47:07
Speaker 2: It's like, if you're looking at the ethics of medicine broadly,
47:10
Speaker 2: it's quite open-ended. And I think to focus it on, well,
47:14
Speaker 2: it's unethical to sort of restrict medicines here, but oh,
47:17
Speaker 2: we're also going to, you know, prices are going to
47:19
Speaker 2: increase here, there and everywhere. And maybe what we access
47:22
Speaker 2: to other markets, depending on, you know, their size and
47:26
Speaker 2: revenue as a country, you know, I'm sort of like
47:29
Speaker 2: talking in tongue at this point, but like, you sort
47:31
Speaker 2: of get my point.
47:31
Speaker 3: Like it's a bit open-ended.
47:35
Speaker 2: You know, I still think it's like a slippery slope,
47:38
Speaker 2: generally speaking. You know, and I, it's hard to not look.
47:46
Speaker 3: At this And I've talked to different sources about this.
47:49
Speaker 2: Like it's tough not to see China's ascension going inside
47:54
Speaker 2: with us as a nation litigating science sort.
47:58
Speaker 3: Of more than we ever have.
48:00
Speaker 2: And I think, you know, sometimes people don't want to hear,
48:03
Speaker 2: you know, like sometimes I've posed in conversations with people like, well,
48:07
Speaker 2: you know, like. you know, like, like I'll put it
48:11
Speaker 2: in this context, like the China's ascending and then you
48:13
Speaker 2: see headlines sort of about like how OMB might be
48:16
Speaker 2: looking at NIH grants. And it's like, even if you
48:20
Speaker 2: agree with the politics of that, um, you know, this, you,
48:25
Speaker 2: I don't know if you could really make a case
48:26
Speaker 2: for why that makes us faster. So like, I think
48:30
Speaker 2: at the very least there's a speed argument to like,
48:32
Speaker 2: is this really in our best interest in terms of
48:35
Speaker 2: our own domestic, like, scientific rigor and pace and I
48:39
Speaker 2: think like that's sort of where I've been thinking about
48:42
Speaker 2: this a little bit more less about like the ethics
48:45
Speaker 2: of any one policy about China because I think then
48:48
Speaker 2: you have people who would sort of counter and be
48:50
Speaker 2: like well it's unethical that.
48:52
Speaker 3: We are we being the.
48:56
Speaker 2: Like if you're speaking like oh well we the investors
48:58
Speaker 2: or we the companies like it's not fair that they're
49:01
Speaker 2: not investing in the US if they're domiciled here and
49:04
Speaker 2: that money is going to go to China like Everyone
49:07
Speaker 2: can sort of bring in a different ethical argument, I think,
49:10
Speaker 2: to make their case. I just I really sort of
49:15
Speaker 2: try to think about it as like they're moving so
49:19
Speaker 2: full speed ahead. you know, and they already just sort
49:22
Speaker 2: of have, just because of the structure of their government,
49:25
Speaker 2: the pace at which they can build and the way
49:27
Speaker 2: that they can sort of rally their population around domestic priorities,
49:34
Speaker 2: coupled with us, you know, seemingly litigating science at every turn,
49:39
Speaker 2: you know, really, I think the FDA has done an
49:41
Speaker 2: outsized job at being sort of a steward of some
49:45
Speaker 2: new innovation.
49:45
Speaker 3: And it's going to take more, right?
49:48
Speaker 2: I mean, the expedited IND pilot program is just now
49:51
Speaker 2: accepting applications, won't really get underway until next year. And
49:55
Speaker 2: even that is like, you know, sort of teeing up
49:59
Speaker 2: maybe a more Australian type of clinical trial notification system
50:03
Speaker 2: further down the line, right? So like the FDA is
50:05
Speaker 2: still probably a couple years out from some more streamlined process,
50:10
Speaker 2: you know, agency-wide on trials.
50:13
Speaker 3: And I think.
50:13
Speaker 2: It's just, it's a hard answer, but I think the
50:17
Speaker 2: honest one is it's like, what do we as a
50:19
Speaker 2: nation want to prioritize and how fast do we want
50:23
Speaker 2: to prioritize it? Like we do, like, you know, the U.S. has,
50:30
Speaker 2: you know, major biotech uh, a dominance, you know, in
50:35
Speaker 2: terms of its research institutions and how that turns into
50:37
Speaker 2: spin outs and how that receives private capital, so on
50:41
Speaker 2: and so forth, go down the line, why the ecosystem
50:43
Speaker 2: has proven to be, you know, successful and it making
50:47
Speaker 2: new drugs. Um, but we don't have, you know, the
50:50
Speaker 2: U S doesn't have a monopoly on that. Um, and
50:52
Speaker 2: I think that's, what's been proven. And so I would
50:55
Speaker 2: say sort of the, my, my, my question about ethics
50:58
Speaker 2: is sort of less now about like, um, Where money
51:04
Speaker 2: flows per se or where it's restricted and the degree
51:10
Speaker 2: to which like medicine and science and biotech all coming
51:16
Speaker 2: together is something that we is. Americans or policymakers sort
51:20
Speaker 2: of want to prioritize. I know I sort of dipped
51:24
Speaker 2: and dodged around your question there.
51:26
Speaker 1: Good job.
51:28
Speaker 2: I thought about it in a larger context. Just like
51:32
Speaker 2: every element of this, it's hard to just nitpick at
51:35
Speaker 2: one thing and act like it's so clearly right or
51:38
Speaker 2: wrong or it's so clearly black and white. And I
51:41
Speaker 2: think the ethics is like the most sort of murky
51:44
Speaker 2: of all of them because everyone could make a case
51:47
Speaker 2: for why one thing is ethical and the other isn't.
51:53
Speaker 2: And I guess it remains to be seen sort of
51:56
Speaker 2: the degree to which China's biotech industry sort of starts
52:01
Speaker 2: to produce those medicines that are so differentiated.
52:04
Speaker 3: I don't think we're quite there yet.
52:06
Speaker 1: That's a good point.
52:08
Speaker 2: So that's why it's kind of hard to answer because
52:10
Speaker 2: it is a bit of a hypothetical still, which is,
52:13
Speaker 2: you know, and what would that drug look like?
52:14
Speaker 3: Where would it, you know, who would it apply to?
52:17
Speaker 2: What is, is it something that, you know, a U
52:19
Speaker 2: S biotech is sort of right, right on their heels of.
52:22
Speaker 2: So sometimes medicines kind of there's often are like maybe
52:26
Speaker 2: a couple of horses chasing down the same lane.
52:28
Speaker 1: Um, well you do find a way to balance it all. Uh,
52:32
Speaker 1: you find a way to be in all the rooms, uh, and,
52:36
Speaker 1: and you glean so much in your conversations, uh, on
52:40
Speaker 1: behalf of the whole incubate team and probably most of, uh,
52:43
Speaker 1: the venture capital ecosystem. Keep writing. We're ever so grateful
52:48
Speaker 1: and grateful you took time to be here today.
52:51
Speaker 3: I will always come on and chat with you, John.
52:52
Speaker 2: It's a pleasure to talk to you about this and
52:56
Speaker 2: to hear from the Incubate team.
52:58
Speaker 3: And thank you for bringing me on. You bet.
53:00
Speaker 1: That wraps up this episode of the Making Medicine podcast.
53:03
Speaker 1: A special thank you to Max for joining us for
53:05
Speaker 1: our Press Pass episode. and for breaking down all things
53:08
Speaker 1: Coins Act regulations. I'm sure we'll have more to be
53:11
Speaker 1: talking about on that, and we'll have him back on
53:13
Speaker 1: the show as more news breaks. To find those episodes,
53:17
Speaker 1: be sure to subscribe on YouTube. Follow us on other channels.
53:21
Speaker 1: Thanks for listening, and as always, keep innovating.