Trump’s ‘America First’ Investment Policy Raises Uncertainty for US-China Biotech Dealmaking

In a recent “Biotech Hangout” discussion, TD Cowen analyst Yaron Weber underscored the innovative potential of Chinese biotech and its strategic importance for U.S. pharmaceutical firms. Despite concerns about China’s growing influence in the biotech field, Weber suggested that as long as U.S. companies could license new drugs, launch new enterprises, and maintain intellectual property ownership, they could thrive within this evolving landscape. However, an emerging investment policy from President Donald Trump injects uncertainty into this equation, posing potential challenges for U.S.-China biotech collaborations.

Overview of Trump’s Investment Policy

On February 21, President Trump issued a memorandum titled the “America First Investment Policy” aimed at fortifying national security while regulating U.S. investments in key sectors, explicitly naming China as a target. This policy encompasses healthcare and biotechnology, suggesting that it could significantly impact U.S. companies’ ability to engage with Chinese biotech firms. Central to this policy is the potential enhancement of the Committee on Foreign Investment in the United States (CFIUS), which could lead to stricter scrutiny of investments originating from China.

The memorandum indicates that the U.S. government may limit both inbound and outbound investments related to foreign adversaries in strategic industries, including the “biotechnology” sector. Although the policy lacks specific details, it reflects the Trump administration’s increasingly tough stance on China, particularly in defense of national security interests.

Potential Impacts on the Biopharma Sector

As analysts begin to dissect the implications of this policy, it is clear that the U.S. biopharma sector could experience disruptions in three significant ways:

1. Restricted Access to Chinese Drug Candidates

One of the most immediate concerns is that U.S. biopharma companies might lose access to a crucial pool of drug candidates sourced from Chinese biotech firms. According to recent data referenced by Stifel, nearly a third of molecules licensed by large pharmaceutical companies in 2024 originated from China. Should the administration deem these licensing transactions as “investments,” it would significantly limit U.S. firms’ capabilities to explore promising drug candidates.

2. Challenges in Forming New U.S. Biotech Startups

Another significant obstacle is the potential hindrance to the development of new biotech firms in the U.S. This often innocuous-seeming model involves Chinese companies spinning off assets to collaborate with investors, creating U.S.-based operations. Traditionally, these arrangements allow Chinese firms to maintain equity stakes in newly formed American biotech companies. The interpretation of “investment” under Trump’s policy raises questions about whether such arrangements might be classified as prohibited investment activities, impeding U.S. startups’ ability to thrive.

3. Loss of Chinese Venture Capital Funding

U.S. biotech startups may also face a substantial reduction in funding from Chinese venture capital, a thriving source of investment in the sector. According to recent data, Chinese firms accounted for nearly 19% of global biotech VC investments by 2020, compared to just 3.5% in 2010. As such, the perception of increased scrutiny and regulatory hurdles may deter Chinese VCs from investing in U.S. startups and expanding into the U.S. biotech market.

Licensing Deals Likely to Remain Unaffected

Despite these concerns, some analysts believe the licensing of drugs from China may not face immediate threats under this new policy. Stifel analyst Tim Opler suggests that the policy’s current text does not explicitly ban licensing agreements, emphasizing that licensing is distinct from equity investments. Therefore, as it stands, pharma companies may continue to engage in licensing deals without significant disruption, though the clarification of policy execution remains critical.

National Security vs. Economic Growth

The balance between national security and economic growth is becoming an increasingly complex debate in the U.S. Proponents of the America First approach argue that safeguarding national security warrants such economic sacrifices, drawing historical parallels to potential threats from Japan and Germany in the early 20th century. However, others warn that excessive restrictions could stifle innovation and collaboration in an industry increasingly reliant on global partnerships.

Conclusion: A Future in Flux

As the life sciences sector grapples with these new uncertainties, it is clear that the dynamics of U.S.-China biotech relations are shifting. With the potential for additional regulatory layers in play, the industry will need to remain vigilant and adaptive. Stakeholders, including pharmaceutical firms and venture capitalists, will have to navigate these complexities to sustain their operational viability and continue fostering innovation in the realm of biotechnology. While the future trajectory of the U.S.-China biotech landscape remains uncertain, one thing remains clear: heightened scrutiny and a potential decrease in collaboration may mark a new chapter in the relationship between these two biotech powerhouses.