As the U.S. Congress advances investment regulations targeting China’s biotech industry, experts foresee shifts in the global biotech supply chain and technology collaboration landscape. The potential expansion of regulations to encompass licensing and joint ventures could simultaneously create opportunities and challenges for domestic pharmaceutical and biotech firms.
The Korea Bio Association’s Bioeconomy Research Center reports that on August 6, U.S. Senators Elissa Slotkin (D) and Pete Ricketts (R) introduced the Biotechnology Investment National Security Act (BINSA) in the Senate.
Earlier, on June 2, Representatives John Moolenaar (R) and Debbie Dingell (D) proposed an identical bill in the House. The legislation aims to include U.S. biotech investments in China under the review scope of the Comprehensive Overseas Investment National Security Act (COINS).
BINSA’s core provision empowers the U.S. Treasury to scrutinize licensing agreements, joint ventures, and equity investments involving Chinese entities in sectors such as drug development, biopharmaceutical manufacturing, and clinical research.
While previous U.S. regulations on China’s biotech sector focused on inbound restrictions limiting Chinese companies’ activities within the U.S., this new bill significantly expands the scope to outbound regulations, aiming to prevent the transfer of U.S. capital and technology to China.
Given the biotech industry’s diverse collaboration forms, including equity investments, joint research, technology transfers, and licensing, the bill’s enactment could impact not only U.S.-China business transactions but also global projects involving U.S. firms.
China is also tightening its overseas investment oversight. In June, it implemented new foreign investment regulations and intensified overseas investment reviews starting July. This could increase hurdles for joint research and development, licensing, and joint ventures between U.S. and Chinese biotech companies.
While the regulations don’t directly apply to South Korean companies, the indirect impact is expected to be substantial.
The Contract Development and Manufacturing Organization (CDMO) sector is likely to be the first area affected. As U.S. pharmaceutical companies reduce their dependence on Chinese biotech firms, demand for alternative production partners could surge.
In this scenario, Samsung Biologics, with its track record of collaborating with global pharmaceutical giants and extensive production capabilities, emerges as a prime beneficiary. Companies like SK Bioscience, experienced in vaccine and biopharmaceutical production, may also find new opportunities.
Growing Demand Expected for New Drugs and Global Tech Licensing
In new drug development, if partnerships with Chinese biotech firms wane, global pharmaceutical companies may turn to South Korea for technology acquisition. Domestic firms such as LigaChem Biosciences, which possesses an antibody-drug conjugate (ADC) platform, and Alteogen, with its global technology transfer experience, could indirectly benefit.
However, this situation isn’t universally advantageous for South Korean companies. If domestic firms rely on Chinese raw materials or utilize Chinese technology and data, they may face intensified supply chain due diligence when dealing with U.S. pharmaceutical companies.
Moreover, if U.S. companies struggle with direct China dealings, South Korean firms might adopt Chinese candidates or technologies for development in the U.S. and Europe. Conversely, domestic companies involved in China-related transactions with U.S. partners may face additional regulatory scrutiny.
In essence, the U.S. Congress’s BINSA proposal presents South Korea’s biotech sector with both an opportunity to serve as an alternative to China in the supply chain and the challenge of scrutiny over China connections. However, as the bill is still in its proposal stage, its actual impact on domestic companies will hinge on its passage and the specifics of its regulations and scope.
An industry insider noted that future U.S. Congressional discussions on specific review targets in the biotech sector, the definition of Chinese companies, and the extent of application to licensing and joint research will significantly influence the actual impact on South Korean firms.
