BioCentury
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Regulation

Impact of China’s export restrictions on biopharma dealmaking likely limited, at least for now

Gene manipulation, biologics manufacturing and next-gen sequencing technology now subject to export restrictions

September 9, 2020 7:52 PM UTC

While a handful of revisions to China’s export restrictions apply to technologies in the biopharma sector, their effect on cross-border dealmaking is likely limited given that many domestic companies are built on an in-licensing rather than out-licensing model. 

Last month, China’s Ministry of Commerce and Ministry of Science and Technology (MOST) revised its catalog of technologies subject to export bans or restrictions. 

A company looking to out-license or sell a regulated technology to an ex-China partner will first need to gain interim approval at the provincial level, which could take up to 30 working days, before entering “substantive” contract negotiations. Once a contract is signed, it will need to apply for a technology export license, which could take another 15 working days.

“You can sign a contract, but that contract needs to say that it doesn’t go into effect until the Chinese government has granted an export license,” Jones Day Partner Tony Chen told BioCentury. The government has the right to know and the right to deny. Compliance is enforced by the thread of administrative penalty and criminal liability.

Newly discovered genes and vectors and gene manipulation technology used for agricultural applications are now subject to export restrictions. 

“The question is whether a technology restricted for export for agriculture purposes would also be restricted for non-agriculture purposes,” said Chen. “Gene editing technology like CRISPR-Cas9 could be restricted as gene manipulation technology.” 

The list also now includes genetically modified cell lines for manufacturing, next-generation gene detection and sequencing instruments, and artificial intelligence and other data-related technologies that could apply to biopharma. 

“A genetically modified cell line for manufacturing vaccines or monoclonal antibodies could be regulated as biologics manufacturing technology,” said Chen.

He declined to speculate on the effect of the revised export list on biopharma deal activity, saying it would likely depend on the government’s response and level of enforcement.

“The government sent a signal to the industry by enforcing the human genetic resource rule and punishing several companies,” noted Chen, referring to the announcement by MOST in 2018 that two high profile cross-border genomics partnerships, by University of California Los Angeles (UCLA) and Shanghai Jia Tong University, and University of Oxford and Peking University, had violated genomic data sharing policies (see “Border Security for China’s Genomes”). 

“The human genetic resources regulation certainly chilled collaboration activities,” said Chen. 

But Ropes & Gray Partner Katherine Wang told BioCentury she expects a minimal impact.

“I don’t think the catalog will generate a major impact in the biopharma industry because China is not necessarily a technology leader in the relevant areas that are deemed restricted or prohibited by the new catalog,” she said. “We are usually assisting U.S. and European companies in talks to out-license their technology to China, so this doesn’t make too much noise in the deals we’re working on.” 

Ropes & Gray client LianBio, launched by Perceptive Advisors, is the latest example of a China-based start-up bringing Western assets to Asian markets (see “Through LianBio, Perceptive Forms Bridge for Western Pipeline Into Asia”).