【Text/Guanwang Finance Wang Muju】The biomedical industry has become a new battlefield in the Sino-US science and technology war?
Yesterday, a foreign media report that the United States will sanction Chinese biotechnology companies triggered a panic-like plunge in the stock prices of domestic CXO (pharmaceutical research and development, production foundry) companies. The market seems to remember the scene when China's chip industry was accurately suppressed by the United States 3 years ago.
However, most institutional analysts believe that in addition to special areas such as genetic testing, the possibility of Chinese pharmaceutical companies being subject to US sanctions is not very likely, especially Chinese CXO companies such as Kai Lai Ying, who have just received a large order for new crown oral drugs in the United States. Chinese companies, which are mainly foundries, have not yet threatened the status of the United States in the industrial chain.
Today, the stock prices of A-share and Hong Kong-stock pharmaceutical companies have also rebounded.
Some CXO companies that attracted attention on the 15th have risen in the closing price of A-shares today
However, like other high-tech fields, the development of biotechnology in China is indeed becoming a thorn in the side of some American politicians. Although there is no need to panic in the short term, it is still necessary to pay attention to US policy trends in the long run.
"Blacklisting Chinese biotech companies helps strengthen our national security"
According to the British "Financial Times" on the 15th, Chinese companies, including some biotechnology companies, will be included in the "Entity List" by the US Department of Commerce on the 16th. Entering this "blacklist" means that normal market opportunities will be deprived. Or affected by this news, yesterday's Hong Kong pharmaceutical stocks ushered in a dive.
While it's unclear what biotech companies the FT mentions, the stock market was in widespread panic that day, particularly the popular CXO track plummeting.
However, from the perspective of recent developments, CXO is not necessarily the target of this sanction, and genetic testing related fields are more sensitive.
According to Fox Business News, in September this year, american politicians advocated blocking Chinese companies engaged in the gene business.
Screenshot of foreign media reports
Republican Senator Tom Cotton and Republican Rep. Mike Gallagher have declared that China intends to use biotechnology for so-called military purposes and harm U.S. interests. They sent letters to the U.S. Secretaries of The Treasury, Defense, and Commerce, asking the Biden administration to blacklist BGI and other Chinese biotech companies.
U.S. politicians reportedly trumpeted in the letter that BGI is not only buying U.S. companies to weaken the global gene sequencing market; it is also offering gene sequencing services to U.S. patients with at least 14 other Chinese companies that "almost certainly have shared this data with the Chinese government."
Politicians further advocated that the data would be used for so-called military purposes.
In a statement to Fox News, Cotton hyped up saying the Chinese side was "stealing the most intimate information of Americans at all costs — including their DNA." The U.S. blacklisting of Chinese biotech companies helps to "strengthen our national security" against so-called "privacy violations."
Tom Cotton, video screenshot
Gallagher told Fox, "Biotechnology is a key emerging area that is likely to define the economy of the 21st century." We are just beginning to understand its potential applications, both positive and negative. The Biden administration must act now, or it will be too late to ensure that Chinese companies like BGI do not dominate this critical area. ”
On the one hand, some US politicians do not hesitate to snare accusations and slander China; on the other hand, they disregard the axioms of facts and market rules, and often want to indiscriminately suppress Chinese enterprises and try to stifle the development of China's high-tech technology, including biomedicine. More U.S. Republican Rep. Andy Barr openly declared that "we will not allow Western capital to be the fuel for China's rise." ”
The United States research and development of new crown drugs, there are also Chinese CXO companies
Although there is no definite news, the first decline in the CXO field may be related to the high attention received by the industry.
The CXO industry originated in the United States in the 1970s, covering all aspects of drug development to final large-scale production of pharmaceutical companies, including CRO (contract research and development organization) and CMO/CDMO (contract production organization). In recent years, the role of China's CXO industry has become increasingly important.
From the perspective of the characteristics of the pharmaceutical industry itself, pharmaceutical enterprises face risks such as high cost, low success rate and long cycle. It takes at least 10 years to market a drug, with an investment of more than $1 billion. The development of a new drug may require screening from more than 10,000 compounds in order to successfully market the last 1 drug.
These features have increased the demand for pharmaceutical outsourcing services in pharmaceutical companies and promoted the development of the CXO industry. The rise of small pharmaceutical companies has increased the willingness to outsource medicines, which will directly stimulate the vigorous development of the CRO industry, and the successful development of new drugs will also lead to the overall development of the CDMO industry. China's huge market, stable supply, and continuously improving technical level have undoubtedly provided the necessary soil for the rise of China's CXO. The role of the Chinese CXO on a global scale will also continue to escalate.
On the evening of November 16, Kai Laiying, one of the leading enterprises in the outsourcing of new drug services in China, said that its wholly-owned subsidiary signed a new batch of "supply contracts" with customers for related products. The cdMO (Contract Custom Research and Development and Production) service of the product has a cumulative contract amount of 481 million US dollars and has officially entered into force. The announcement said that the customer is a large pharmaceutical company in the United States, and the contract is a small molecule chemical innovative drug service contract, with a cumulative amount of more than 3 billion yuan (calculated according to the latest exchange rate).
According to the "21st Century Business Herald" reported on the 17th of the same month, the reporter of the newspaper learned that the innovative drug involved in this order is the new crown oral drug of Pfizer in the United States. Some sources said that in addition to Gloria Ing, Pfizer and Merck do not rule out plans to cooperate with other CXO companies in China, including industry-leading outsourcing companies such as WuXi AppTec.
This also proves that the role of Chinese CXO companies in the US and even in the global pharmaceutical industry chain is still important, for example, WuXi AppTec has always been known as "Foxconn in the pharmaceutical field", and its industrial chain position is mainly to provide outsourcing services for overseas original pharmaceutical companies, rather than constituting direct competition. If the United States indiscriminately suppresses it, it will inevitably "lose eight hundred of its own."
At the same time, in the market fluctuations of the 15th and 16th, the CXO companies that once led the decline were not directly related to the genetic field that american politicians had openly attacked before, and the so-called "military purposes" they concocted. The impact of the news of the RUMORS of the US "blacklist" should not last long.
But that doesn't mean that Chinese CXO companies will have to sit back and relax.
While China's CXO industry is booming, external risks are still worth paying attention to.
The Chinese market is still optimistic, and the stock prices of CXO companies have rebounded today
According to consulting firm Frost & Sullivan, the size of the Chinese CRO market was $7.6 billion in 2020, accounting for 11.6% of the global CRO market. Affected by supportive policies, R&D expenditure growth and other factors, china's CRO market is expected to continue to expand, reaching $22.9 billion in 2025, accounting for 21.0% of the global CRO market size in the same period, and the overall market share is about three times that of 2020.
Observing the flash crash of the stock prices of biomedical companies in the afternoon of the 15th, we can see that CXO (pharmaceutical outsourcing industry) companies and innovative pharmaceutical companies have fallen ahead. WuXi Biologics (2269, HK) fell 19.24%, WuXi AppTec (2359, HK) fell 19.06%, and Kanglong Chemical (3759, HK) fell 15.57%.
According to the "Daily Economic News" reported on the 15th, brokers have different views on the huge dive of the CXO plate in the afternoon of the same day.
Some analysts commented that the US "sanctions" program is mainly aimed at research institutes and biotechnology companies related to human genomics research, and is not directly related to leading CXO companies such as WuXi AppTec and Kanglong Chemical, and believes that the sharp decline is a revaluation of risk assets and an overreaction of companies with large overseas business exposure.
However, some brokerage analysts believe that if the news is true, then the target companies of Pre clinical CXO (preclinical CXO) such as WuXi AppTec and Kanglong Chemical Will be affected by this, because their IP involving innovative drugs and most of their revenue comes from overseas customers.
On the morning of the 16th, CXO leading enterprise WuXi AppTec responded to yesterday's stock price fluctuations. The company said that it is currently operating normally and is confident in the future business growth, continued empowerment of global customers and the benefit of global patients. If there are any matters that should be disclosed in accordance with the regulations, the company will announce them in a timely manner.
Today (December 16) morning opened, Hong Kong pharmaceutical stocks ushered in a rebound. According to Wind data, as of 9:34, the healthcare sector led the Hang Seng industry sector with a 1.64% increase. After the A-share market, as of 15:04, Hong Kong stock WuXi Biologics rose 10.11%, WuXi AppTec rose 7.80%, and Tigermed rose 6.82%. Rongchang Bio rose 3.32%. Kanglong Huacheng fell back after rising, down -0.32%.