Despite rhetoric, Chinese investors eye US biotech

Despite tough talk by President-elect Donald Trump about a possible trade war, Chinese investors are hungry for US biotech and they have money to spend.

In the latest purchase following a record 2016 for Chinese healthcare takeovers, Nanjing-based Sanpower Group Co said it would buy a cancer treatment business from Valeant Pharmaceuticals International Inc for $820 million.

Sanpower's interest is far from unique. Chinese venture capitalists and individual investors are looking as well. Last Sunday morning, in a hotel ballroom a short hop from the San Francisco airport, about 250 jet-lagged potential dealmakers and American biotech executives could be heard chatting in Mandarin and English. They were attending a get-together hosted by boutique investment firm CTIC Capital, hoping to forge alliances before the start of the industry's biggest annual gathering, the JP Morgan Healthcare Conference, at the Westin St Francis in San Francisco.

China has a "huge pile of money" and a lot of new venture capital firms, but a limited number of homegrown drug startups to invest in, said Kevin Chen, a partner at the China Fund of Menlo Park, California-based Sequoia Capital. The fund, which spends about a quarter of its $3 billion under management on health care, last year started founding US-based startups with Chinese ties, helping bridge the gap for investors.

US investors are beginning to notice. The JP Morgan conference has an entire track dedicated to China-based healthcare companies at the conference. And last year, Chinese firms announced or completed about $8 billion in cross-border acquisitions, according to data compiled by Bloomberg.

"The gate is open and it won't be closed again," said Lan Huang, chief executive officer of BeyondSpring Pharmaceuticals Inc, a maker of cancer drugs with headquarters in New York and offices in Dalian, China. Her company, which plans to go public, has been meeting with investors from both countries.

The conference comes at a pivotal moment for the two nations. Trump's rhetoric against China has some investors worrying about a cooling effect on business. He has promised tariffs on Chinese goods, and China has said it's prepared to step up its scrutiny of US companies.

Jennifer Hu, a partner at China-based Qiming Ventures Partners, said: "If there's no clear sign that it's safe to invest in the US and that innovation will import to China, that's going to hurt investors. They could go to Australia or Canada for that innovation instead."

Qiming, which spends about 40 percent of its $2.7 billion in funds on healthcare, is currently raising money for its first fund to be dedicated to US health investments. Up to now, Qiming had focused its investments on Chinese companies.

Bloomberg