Why investors are chasing US biotechs with Chinese characteristics

{"text":[[{"start":11,"text":"On the surface Kailera Therapeutics is another US biotech start-up, with a Nasdaq listing and headquarters in Waltham, Massachusetts, a leafy Boston suburb and industry hub."}],[{"start":22.35,"text":"But it got its start a world away in China, where its portfolio of weight-loss drugs was developed by Shanghai-based Hengrui Pharma, the country’s largest drugmaker by market value."}],[{"start":33.45,"text":"Kailera’s origin story highlights an emerging trend in the global pharmaceutical industry: Chinese drugs are seeding US biotech start-ups. "}],[{"start":42.2,"text":"While big pharmaceutical companies such as AstraZeneca and Pfizer have flocked to China to buy assets with the potential to replenish their pipelines, a different type of investor is emerging, targeting early-stage drugs with a view to selling them on or developing them further."}],[{"start":57.800000000000004,"text":"Kailera, formerly known as Hercules, was formed by a consortium of investors, including Bain Capital Life Sciences, the US buyout group’s pharma arm. The consortium secured the overseas rights to Hengrui’s weight-loss portfolio in 2024 and is expecting to start global late-stage trials next year. At its initial public offering this month Kailera raised $719mn, making it one of the largest US biotech listings on record. "}],[{"start":null,"text":"

"}],[{"start":85.30000000000001,"text":"Chief executive Ron Renaud told the FT: “I’m not sure there is a global pharmaceutical company right now that does not have some type of relationship with a Chinese drug developer.”"}],[{"start":95.80000000000001,"text":"“I think we just have to be agnostic to where [drugs] come from or how they are developed,” he added. “We benefit from the fact that they can move quickly” in China. “The ultimate beneficiary of this is going to be patients in the west.”"}],[{"start":110.65,"text":"Kailera employs more than 150 people in the US and Renaud said it was “really excited about building the company in the US for employees and patients in the US”."}],[{"start":121.95,"text":"But trials for its drugs were conducted in China by Hengrui, which is also Kailera’s second-largest shareholder after Bain, owning a nearly 10 per cent stake and has a seat on its board."}],[{"start":133.1,"text":"Aaron Gu, a life sciences partner at law firm Han Kun, said many deals were “too early for big pharma to buy”, creating an opening for investors to set up companies such as Kailera to back drugs at an early stage of development."}],[{"start":147.65,"text":"The “NewCo” structure is not unique to the pharmaceutical industry. In biotech, however, it often involves investors aiming to cash in by bringing foreign drugs to the US, the world’s largest medicines market."}],[{"start":160.4,"text":"“Big Pharma and these NewCos also come with different term sheets,” Gu said, adding that the big groups generally pay more upfront for assets in China. By contrast, if the Chinese party sells to a NewCo, they will receive less cash but potentially a stake in the new company."}],[{"start":null,"text":""}],[{"start":177.5,"text":"The increased popularity of these deals was also benefiting partners in the Asian nation, he said. “As the world has realised the success of Chinese biotech in the past couple of years, the Chinese companies have acquired more leverage in negotiations.” "}],[{"start":190.7,"text":"The growth of US biotechs seeded with Chinese drugs “has really taken off in the last 12 to 18 months”, said Stephen Thau, co-chair of the life sciences group at law firm Orrick. "}],[{"start":202.54999999999998,"text":"At the same time, the White House is increasingly wary of Chinese competition in biotech."}],[{"start":209.1,"text":"“The biggest threat that we have in the drug space is China,” Marty Makary, head of the US Food and Drug Administration, said at a staff briefing this month. China’s lead in drug testing and development “is a significant issue and we can’t ignore it”, he added."}],[{"start":222.7,"text":"President Donald Trump in December signed the Biosecure Act, a law that bans the federal government from doing business with “biotechnology companies of concern”. The law did not list Chinese biotech groups, but it was seen as a warning to the industry about doing business with the country."}],[{"start":239.79999999999998,"text":"Last year, China jumped ahead of the US in early-stage drug testing, according to research in the Journal of the American Medical Association. "}],[{"start":248.6,"text":"In the third quarter of 2025, 40 per cent of global early-stage drug testing was conducted in China, against 35 per cent in the US. In 2015, only 8 per cent of such trials were in the Asian nation compared with 48 per cent in the US."}],[{"start":null,"text":""}],[{"start":266.85,"text":"The US share of early-stage drug testing “is declining relative to the exponential growth from China”, said Yunan Ji, professor at Georgetown University and co-author of the research. Trials are cheaper to run in China and can be completed faster, she said, and “increasingly you have a very well educated workforce of scientists who can run these experiments”."}],[{"start":288.70000000000005,"text":"Hengrui, which has a $54bn market capitalisation, is China’s largest pharmaceutical company and has drug-licensing deals with international groups including Merck, Braveheart Bio and Glenmark Pharmaceuticals."}],[{"start":302.1,"text":"The NewCo structure can simplify cross-border challenges such as seeking regulatory approval from the FDA, which has rejected Chinese clinical studies as not representative of the US population. Creating a US company also avoids the problems Chinese companies can have listing on US stock exchanges."}],[{"start":320.95000000000005,"text":"Eikon Therapeutics, which went public in February and is led by veteran pharmaceutical executive Roger Perlmutter, owes two of its drugs in development to Shanghai-based Impact Therapeutics. "}],[{"start":332.20000000000005,"text":"California-based Eikon has paid Impact $45mn and will owe up to $956mn if the two drugs meet regulatory and sales goals, Eikon’s regulatory disclosures show. "}],[{"start":345.45000000000005,"text":"Perlmutter said: “China is among those countries that host a large and productive biotechnology ecosystem, but we have frequent interactions with scientists in western Europe and Japan.”"}],[{"start":356.15000000000003,"text":"“The geographic origin of an idea is much less important to us than the quality of the work that underlies these efforts.”"}],[{"start":363.05,"text":"Other biotechs with drugs developed in China have raised private capital in recent months. One of them is AirNexis, which is developing a drug for chronic obstructive pulmonary disease and raised $200mn this year in one of the biggest biotech fundraisings of the year, according to HSBC data."}],[{"start":381.7,"text":"Haisco Pharmaceutical Group, based in Shannan City, Tibet, developed a drug for Palo Alto-based AirNexis. Haisco is running a phase 2 clinical trial for the drug in China, AirNexis said in January, and has a 20 per cent equity stake in the US company."}],[{"start":398.95,"text":"AirNexis did not respond to requests for comment. "}],[{"start":402.55,"text":"The US ownership structures do not always include an equity stake for the Chinese pharmaceutical company, said Thau from Orrick, but any foreign ownership of a US-based entity can trigger regulatory review by the Committee on Foreign Investment in the US, which vets overseas investments for national security risks. "}],[{"start":421.25,"text":"For biotechs, “to date, it’s largely been a manageable issue”, he said. Renaud said he was “not aware” of Cfius issues at Kailera."}],[{"start":430.1,"text":"There were also risks involved in taking new drugs out of China, Thau said. “I am aware of situations where Chinese regulatory approval was required and [it] delayed closing of transactions until it actually occurred.”"}],[{"start":451.8,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1777359379_8058.mp3"}