Biotech stocks Zai Lab and BeOne Medicines plummeted Wednesday on reports President Donald Trump will issue an executive order to reduce U.S. access to drugs developed in China.
The potential move sets up a battleground between investors in the U.S. biotech space and companies like Pfizer and AstraZeneca, which have spent years beefing up their pipelines with low-priced drugs out of China. Politicians on both sides of the political aisle have called America's reliance on drugs out of China a national security vulnerability.
According to the New York Times, the draft order calls for boosting U.S. production of some types of medicine. The order further proposes the government should give preference to those American-made products in its purchasing.
Zai Lab, which is headquartered in Shanghai, saw its shares tumble 9% to 28.65. Shares of BeOne, which originated out of China as BeiGene, dropped 10.5% to 314.23.
Will This Help U.S. Biotech Stocks?
Leerink Partners analyst David Risinger doesn't expect the move to bolster U.S.-based biotech stocks.
Instead, he believes U.S. biopharma would be better served by "positive U.S. government actions." That could include lower U.S. regulatory burdens, financial incentives and supporting U.S. scientists and companies in "conducting groundbreaking research."
But placing restrictions on U.S. biopharma companies licensing or acquiring assets out of China could backfire, he said in a client note.
"Drug companies headquartered in other countries could capitalize on the void and ultimately commercialize the novel drugs in the U.S. and globally," he said. "Limiting access to low-cost, rapid development in China could hamper U.S. biopharma drug development and pipeline enhancement efforts."
Big Pharma Shops In China
Companies like Pfizer and AstraZeneca have both licensed assets recently out of China.
Pfizer is licensing an experimental cancer treatment from China's 3SBio. That drug could rival similar efforts from BioNTech and Summit Therapeutics.
Meanwhile, AstraZeneca in 2023 made its move into the weight-loss space licensing Shanghai-based Eccogene's GLP-1 drug. This takes on branded drugs from Novo Nordisk and Eli Lilly.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
