US biotechs have seen a dras­tic drop in Chi­nese ven­ture fund­ing for the in­dus­try amid macro lev­el trade ten­sions be­tween the two coun­tries and the Amer­i­can gov­ern­ment’s height­ened scruti­ny of for­eign in­vest­ment. While VCs from Chi­na ac­count­ed for $1.65 bil­lion worth of fund­ing in the first half of last year, that fig­ure has fall­en near­ly 60% to $725 mil­lion in 2019, the Fi­nan­cial Times re­port­ed cit­ing Pitch­Book da­ta.

The once-ob­scure Com­mit­tee on For­eign In­vest­ment in the Unit­ed States (CFIUS) be­came a house­hold name in this world late 2018 when it broad­ened its re­view of for­eign in­vest­ment in biotech for na­tion­al se­cu­ri­ty rea­sons. It has since stirred up fears that fledg­ling US biotechs may have trou­ble ac­cess­ing deep wells of Chi­na mon­ey, though VCs have large­ly played down the wor­ries.

So far, there’s on­ly been one known in­stance of di­rect CFIUS in­ter­fer­ence in­to health­care. The com­mit­tee is said to have de­mand­ed that Pa­tients­LikeMe — an on­line ser­vice con­nect­ing pa­tients with each oth­er and gen­er­at­ing re­al-world da­ta in the process — sell off the ma­jor­i­ty stake held by Shen­zhen-based health da­ta com­pa­ny iCar­bonX. (Pa­tients­LikeMe was ul­ti­mate­ly ac­quired by Unit­ed­Health.) Nev­er­the­less, it is un­clear how many fund­ing rounds might have fiz­zled in the head­wind.

William Hasel­tine

At least one, ac­cord­ing to William Hasel­tine, the re­searcher and en­tre­pre­neur be­hind mul­ti­ple star­tups in­clud­ing Den­dreon, Cam­bridge Bio­sciences and X-VAX.

Hasel­tine told the FT that he had been forced to aban­don a new project af­ter a Chi­nese in­vestor called off a $30 mil­lion seed deal. In his ex­pe­ri­ence, Chi­nese fund­ing has been par­tic­u­lar­ly good at bankrolling very ear­ly-stage com­pa­nies gen­er­ous­ly.

“As soon as the Cfius pro­gramme went in­to place and [US Pres­i­dent Don­ald] Trump start­ed mak­ing a lot of noise about Cfius, [the mon­ey] be­gan to evap­o­rate,” he said to the pa­per.

Fo­s­un In­ter­na­tion­al, the con­glom­er­ate that has its own bio­phar­ma busi­ness in Chi­na, has in­di­cat­ed that it’s turn­ing greater at­ten­tion to emerg­ing mar­kets as trade re­la­tions with the US grow in­creas­ing­ly frayed.

“Trade fric­tion has im­pact­ed our in­vest­ments in the US, but not to the ex­tent of stop­ping all deals,” Kevin Xie, who man­ages its US strat­e­gy, told Bloomberg.

Leon Chen of 6 Di­men­sions Cap­i­tal at the US-Chi­na Bio­phar­ma In­no­va­tion and In­vest­ment Sum­mit in Shang­hai on Oc­to­ber 23, 2018; Cred­it: End­points News, Pharm­Cube

Click on the im­age to see the full-sized ver­sion

At the same time, it’s worth not­ing that some of the most well known Chi­nese VC firms — such as 6 Di­men­sions and Qim­ing Ven­tures — have ded­i­cat­ed state­side funds in­vest­ing with US dol­lars.

Leon Chen of 6 Di­men­sions pre­vi­ous­ly told me that he’s not over­ly con­cerned about CFIUS re­views as they will abide by the sys­tem — even if it slows down the process.

“This in­dus­try needs more cap­i­tal than the cur­rent in­vest­ment can sup­ply, and the in­dus­try needs much much more risk tak­ing in­vestors than cur­rent­ly we can prac­ti­cal­ly count,” he said.

Frank Yu Al­ly Bridge

Frank Yu, founder and CEO of Al­ly Bridge Group, echoes that sen­ti­ment. Sure, life sci­ences care about how they would man­age CFIUS is­sues as a non-US in­vestor, but their un­der­stand­ing of what they’re in­vest­ing in and the ca­pa­bil­i­ty to add val­ue are more im­por­tant.

“We are per­ceived as a tru­ly glob­al life sci­ence spe­cial­ist in­vestor rather than a Chi­na VC,” he wrote in an email. “We un­der­stand and man­age CFIUS-re­lat­ed is­sues very well, which are very much wel­comed by US com­pa­nies.”

Biohaven is at risk of making a habit of disappointing its investors. 

Late Friday the biotech $BHVN reported that the FDA had rejected its application for riluzole, an old drug that they had made over into a sublingual formulation that dissolves under the tongue. According to Biohaven, the FDA had a problem with the active ingredient used in a bioequivalence study back in 2017, which they got from the Canadian drugmaker Apotex.

Let the long battle for biosimilars in the cancer space begin.

Amgen has launched its Avastin and Herceptin copycats — licensed from the predecessors of Allergan — almost two years after the FDA had stamped its approval on Mvasi (bevacizumab-awwb) and three months after the Kanjinti OK (trastuzumab-anns). While the biotech had been fielding biosimilars in Europe, this marks their first foray in the US — and the first oncology biosimilars in the country.

→ On the same day it announced a $17.5 million Series C, life sciences and health data company Seer unveiled that it had lured former FDA commissioner and ex-CMS administrator Mark McClellan on to its board. “Mark’s deep understanding of the health care ecosystem and visionary insights on policy reform will be crucial in informing our thinking as we work to bring our liquid biopsy and life sciences products to market,” said Seer chief and founder Omid Farokhzad in a statement.

Gilead CEO Daniel O’Day’s new task hunting up a CSO for the company isn’t stopping the industry’s dominant antiviral player from doing pipeline deals.

The big biotech today snapped up 3 preclinical antiviral programs from pharma giant Novartis, with drugs promising to treat human rhinovirus, influenza and herpes viruses. We don’t know what the upfront is, but the back end has $291 million in milestones baked in.