U.S. Draft Executive Order “More Bark Than Bite”: Will Chinese Innovative-Drug BD Deals Still Benefit Long-Term?

Chinese innovative-drug BD deals — clear, concise analysis and next steps for investors and founders.

Key Points

Market jitters after reports of a U.S. draft order

Chinese innovative-drug BD deals were the headline driver on September 11 when Chinese and Hong Kong stocks opened lower.

The China innovative-drug sector (chuàngxīn yào 创新药) index fell more than 4% in early trading.

The Hang Seng biology index briefly dropped over 7% after reports the U.S. was considering a draft executive order to tighten review of certain drug deals and clinical data coming from China.

The draft reportedly would: require the U.S. Committee on Foreign Investment in the United States (CFIUS) to more strictly review multinational pharmaceutical companies’ (MNCs) buyouts of Chinese drug pipelines.

The draft would also raise FDA review thresholds for clinical trial data from Chinese patients, encourage domestic drug manufacturing and procurement in the U.S., and accelerate approval of clinical trial applications for U.S. companies.

The stated intent was to restrict experimental drugs and clinical data from China as the U.S. responds to perceived national-security risks tied to China’s biotech rise.

But the market panic eased quickly.

Several investment and industry analysts who spoke with health-market consultancy Jianwen Consulting said the chance this draft becomes a final, enforceable policy is low.

In the short to medium term they expect limited practical impact on Chinese biotech outbound business development (BD).

They largely viewed the episode as an emotional market disturbance rather than a materially binding change.

What the draft targets — tougher CFIUS scrutiny on BD deals

One clause that spooked investors would expand CFIUS review to include BD transactions where U.S. multinationals acquire pipelines or assets from Chinese biotech firms.

The worry was understandable on paper: in the first half of this year, outbound BD deals for Chinese innovative drugs totaled roughly ¥475.2 billion RMB ($66.0 billion USD).

Morgan Stanley (Mogenshidanli 摩根士丹利) has estimated that by 2040 as many as 35% of new drugs approved in the U.S. could originate from China if current BD trends continue.

That projection helps explain why expanded review would be on the table: U.S. stakeholders want to protect domestic industry advantages.

But this issue actually pits two U.S. interest groups against each other.

One camp is venture-backed U.S. biotech firms that compete with Chinese assets on BD deals and which have lobbied to limit foreign access.

The other camp is large multinational pharmaceutical companies (MNCs) that have long benefited from buying overseas pipelines to shorten development timelines and reduce costs.

Those large MNCs carry far more political and economic clout in Washington than smaller biotechs.

Large MNCs also face a wave of patent expirations: by 2035, European and U.S. pharma firms will have roughly ¥828.0 billion RMB ($115.0 billion USD) in patents expiring.

That creates heavy pressure to replenish pipelines through BD.

Given that Chinese assets are seen as relatively high-quality and lower-cost, MNC objections could blunt any move that restricts their ability to buy in China.

That is one key reason many analysts judge the chance of this draft becoming a binding executive order to be very small.

A BD-focused source inside a domestic biotech said they were initially nervous when the reports broke but relaxed after assessing the landscape.

“Even if something were signed, it would mainly affect large U.S. MNCs. Also, a lot of our partners are European, so the practical impact on our BD plans would be limited,” they said.

Analysts also note many practical workarounds.

MNCs could obtain rights via offshore newcos or regional structures in Europe, Singapore, Japan and elsewhere — insulating transactions from direct U.S. restrictions.

“There are many ways to sidestep a blunt policy; a U.S. executive order would mainly hurt U.S. domestic MNCs, not everyone,” an investor who follows the U.S. market closely commented.

Clinical-data scrutiny: a science problem, not a political one?

The draft’s second attention-grabbing measure was raising FDA scrutiny of clinical-trial data gathered from Chinese patients.

Industry insiders argue this would not be a fundamental change because the U.S. Food and Drug Administration (FDA) has long tightened review standards globally.

Sponsors already anticipate redoing or expanding late-stage trials to satisfy regulatory expectations.

As one senior fund manager noted, the FDA’s standards have been trending stricter across the board for years — not only for Chinese sponsors but for U.S. companies as well.

For innovative Chinese drugs seeking U.S. approval, it’s already routine to expect additional Phase III work overseas with enrollment that emphasizes white (Caucasian) populations plus representation of Black, Hispanic and other groups.

Cost is a major limiting factor.

Recruiting a single oncology patient for a trial costs roughly ¥60,000–70,000 RMB in China.

By contrast, recruiting that patient in many overseas markets can cost ¥432,000–504,000 RMB ($60,000–70,000 USD).

Faced with those economics, many Chinese biotech firms keep domestic intellectual-property rights and sell overseas development and commercialization rights through BD.

To create sellable value, many China-based innovators run dual Phase I trials in China and the U.S. because Phase I enrollments are small and relatively affordable.

That approach gives them early human data that can attract MNC partners, who then fund the expensive Phase III development.

Would tougher U.S. scrutiny of Chinese clinical data shut down these collaborations?

Most insiders say no.

They emphasize that data validation is fundamentally a scientific, not purely political, question.

Regulators look for data integrity, trial conduct quality, site capabilities and patient population relevance.

The reputation and track record of China’s clinical research have improved substantially.

Many MNCs now favor running trials in China because recruitment is faster and clinical capacity is plentiful.

Takeaways: BD outbound still has years of upside — but domestic footing matters

Although the draft provoked short-term market volatility, the consensus view in the industry is that the proposal’s chance of becoming law is small.

Still, the episode highlights one persistent risk for Chinese biotech BD: international politics can create episodic friction.

Most analysts see a continued BD “dividend” for at least another 5–10 years.

Demand from big pharma to fill patent cliffs and add pipelines will remain robust.

For example, Merck (Moshadong 默沙东) faces major patent expirations — its blockbuster “K” drug has revenues north of ¥216.0 billion RMB ($30.0 billion USD) annually — and gaps created by such expirations spur urgent BD activity.

2025 has already seen record-sized BD deals.

High-profile transactions this year include agreements worth more than ¥32.4 billion RMB ($4.5 billion USD) for Hebo Pharmaceuticals (He Bo Yiyao 和铂医药).

Other headline deals include roughly ¥43.6 billion RMB ($6.05 billion USD) for 3SBio (Sansheng Zhiyao 三生制药).

Another deal was about ¥38.4 billion RMB ($5.33 billion USD) for CSPC Pharmaceutical Group (Shiyao Jituan 石药集团).

At the end of July, Hengrui (Hengrui 恒瑞) and GlaxoSmithKline (GSK, Gelansu Shike 葛兰素史克) announced a global-license deal for a core asset reported to be the industry’s first ¥72+ billion RMB ($10+ billion USD) BD transaction.

The era of “fire-sale” or “floor-price” deals is fading.

Observers say buyers and sellers increasingly agree on fairer, higher valuations as Chinese assets prove their quality and efficiency.

But the political scare also delivers a strategic lesson to Chinese innovators: don’t rely on outbound BD as a single exit strategy.

After the BD boom, some biotech teams became too eager to sell whatever assets they had — even early-stage candidates with limited data.

That approach is risky.

Analysts recommend a two-legged strategy: develop strong domestic commercialization while pursuing BD selectively.

China’s own healthcare reimbursement, expanding commercial insurance (shāngbǎo 商保), and improving market access are lengthening and lifting domestic revenue peaks for innovative drugs.

That increases the value of holding on to domestic rights for longer.

Bottom line

• Market Reaction: Initial panic swiftly normalized, indicating resilience.

• BD Flows: Expected to continue robustly due to persistent MNC demand and strategic workarounds by companies.

• Strategic Imperative for Chinese Innovators: Diversify exit strategies beyond BD to include strong domestic commercialization.

The U.S. draft executive order rattled markets but, if history and political dynamics are any guide, its practical reach is likely to be limited.

Chinese biotech outbound BD still has multi-year structural tailwinds driven by global patent expiries, China’s low-cost and fast clinical development environment, and strong buyer demand.

At the same time, Chinese innovators should strengthen their domestic commercialization strategies so they’re not overdependent on cross-border BD as the only path to value realization.

Chinese innovative-drug BD deals still look like a smart, multi-year play for selective sellers and strategic buyers.

Practical actions for investors, founders, techies and marketers

For investors: focus on biotech teams that can keep domestic rights and show a credible commercialization path in China.

For founders: structure BD term sheets to preserve meaningful domestic upside while capturing overseas development funding.

For BD teams: build offshore structures and partner flexibility to mitigate geopolitical friction.

For marketers: highlight trial-quality metrics, CRO partnerships, and site-level data integrity when positioning assets to MNCs.

Linking opportunities

Suggested anchor texts you can link internally or externally:

• “CFIUS biotech review” — link to regulatory coverage pages.
• “FDA clinical-trial standards” — link to FDA guidance on global trials.
• “China clinical trial recruitment” — link to CRO capacity reports or case studies.
• “Patent cliff and BD strategy” — link to pharma patent-expiry analyses.
• “Domestic commercialization in China” — link to reimbursement and market access resources.

Quick highlights to share

• Short-term: Market reaction was panicked but quick to normalize.
• Medium-term:: Practical BD flows likely continue thanks to MNC demand and workaround structures.
• Long-term:: Chinese innovators should diversify exits — BD plus robust domestic commercialization.

References

• 美国政府行政令草案“雷声大雨点小”，中国创新药BD出海仍有长期利好？ – 第一财经
• 美国政府行政令草案“雷声大雨点小”，中国创新药BD出海仍有长期利好？ – 东方财富
• Morgan Stanley – Morgan Stanley