Benefits U.S. deals can bring for Chinese investors
January 15, 2016

Growing Chinese biotech industry seeking foreign investments

In just three decades, China has grown from one of the world’s poorest countries to the second largest economy on the planet, and the country’s overseas investment has grown with it. Much of this growth comes from boosts in advanced sectors like  technology , aerospace, renewable energy, biotechnology, advanced manufacturing, robotics,real estate and artificial intelligence, where Chinese investors are looking for new markets to grow these industries.

China has made growing its biotechnology industry a national priority and like with other Chinese industries, biotech companies are looking for new growth opportunities in the U.S. The amount of China’s foreign direct investment in the healthcare and biotech industry has more than tripled since 2012, according to the Rhodium Group’s China Investment Monitor. Chinese biotech firms have nearly $2.4 billion invested in mergers and acquisitions (M&A) or greenfield activity in the U.S.

Here’s how China’s growth in biotech can lead to more investment opportunities in the U.S.

 

 China primed for biotech growth

China isn’t one of the world’s top outbound investors in biotech deals, but as the market grows, the country’s domestic healthcare industry will look to invest more in innovative marketplaces like the U.S. These deals would offer a pipeline of advanced biotech technology to the one of the world’s largest marketplaces.

China companies will be also looking for opportunities in manufacturing, in order to bring established products into their own domestic distribution and marketing networks. One segment of the industry that will continue to draw strong interest in investment will be M&A and greenfield projects for hospital and clinics. Relaxation of foreign equity restrictions in healthcare are expected to help continue this trend, according to global financial law firm Baker & McKenzie.

 

Access to China’s markets

China’s market makes up one-fifth of the world’s population, making it a key market for product development. Access to China’s markets will make M&A activity inviting for some U.S. firms. And the Chinese government is helping make the market more inviting.

There are regulatory efforts to bring the country’s regulatory system more in line with international standards. This move will speed up drug registration, opening pathways for new treatments for cancers and rare diseases, new drugs targeting diseases without effective treatment and biological extracts. according to a report by Biotechnology Innovation Organization.

 

Tech driving activity

Technology development is a key factor driving worldwide M&A activity, with its pace figuring to make key changes in a dynamic market over the next five to 10 years, reports Forbes. BGI Shenzhen, China’s largest biotech company,  acquired Complete Genomics to gain access to data processing technology and the U.S market for sequencing services, the clients of which it can now serve directly.  The company used the deal as a shortcut into the U.S. market.

China’s biotechnology industry is ready to make a bigger impact in the worldwide market and advances in research and development (R&D) are a way to improve the products it can deliver to consumers. The Wall Street Journal reports that China’s R&D spending has increased by more than 22 percent since 2012, with total R&D spending expecting to top Europe in 2018 and the U.S. by 2022.

 

Strong biotech M&A in the U.S.

There market for M&A in the biotech sector remains strong in the U.S. A report from BDO consulting firm showed $202 billion in M&A activity in 2015. Nearly a quarter of companies listed on the Nasdaq Biotechnology Index in engaging in M&A in 2015. Biotechs are seeing a big jump in revenue, up 44 percent in 2014, with larger companies seeing the greatest increase, growing their average revenue by 52 percent.

 

International investors seeking out the U.S.

 

The U.S. market is popular for its innovation and the level of activity, notes international law fim Baker & McKenzie. The international M&A market in healthcare is also strong, with cross-border deals hitting a high of $259 billion in 2014. U.S. deals accounted for 59 percent of that market, as the country accounted for both the number of inbound and outbound investment in the healthcare sector.

The United States’ biotech market is intricate, strong and inviting M&A activity. Choosing a financial adviser that can navigate this versatile market and find the right companies to acquire, merge with or strike other investment-related deals.

At Vasari Capital, our independent approach can help Chinese biotech M&A investors preserve privacy while providing the resources, contacts, experience and knowledge to acquire assets in the U.S. that will spur future growth.