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Flynn's Harp: Biotech sector enthused by New Locke role (3-9-11)

Posted on 3/10/2011 by Mike Flynn


With companies in both China and the U.S., particularly Washington State and particularly biotech companies, engaged in an increasingly frenzied let’s-get-together dance, there’s been a growing sense that connectors who understand both sides has been the missing link.

That’s why word that former Washington Gov. Gary Locke is likely headed for China as the new U.S. ambassador has been greeted with enthusiasm by business leaders in Washington State, and executives of the biotech sector in particular.

There’s the feeling that Locke’s knowledge of both countries’ ways of doing business, and the respect he built with Chinese leaders during his visits there as this country’s first and only Chinese governor, may serve to make Locke a key to creating those links.

And there’s a sense on the part of leaders of Washington State’s biotech industry that with Locke, biotech companies from this state desiring to seize on China’s focus on partnerships with young Chinese biotech companies may get a boost to the head of the line.

Donald Wyatt, a Bellevue IP attorney focused on creating partnerships between U.S. and Chinese firms, thinks the Chinese government strategy of dedicating special grants for its start-up companies, particularly fledgling biotech firms, is a key already in place to enhance linkages. He says the newly expanded government grants are seen by China as a means of luring companies from the U. S. and elsewhere into partnerships.

Locke, whose nomination still requires the formality of approval by the U.S. Senate, would have more far responsibilities in managing relations between the two nations than merely commercial ties. But the latter could become an ever more important part of the ambassador role as businesses in both nations seek to expand those ties.

“China is trying to boost start-up businesses with product-development grants that thus make the capital risk very low,” Wyatt said, in a phone conversation from his Wyatt Group China’s Shanghai office. “The reason is that the government wants to see technology-based industry, particularly biotech, grow all across the country, not merely in politically connected areas.”

“The implication for U.S. and foreign companies is that Chinese companies are looking to partner and a U.S. biotech or pharmaceutical company could partner with a Chinese company, increase the overall valuation of their assets and do it at virtually zero risk,” Wyatt suggested.

Wyatt says the enhanced ability for a North American biotech company to raise financing with a good joint-development deal in China that is funded through government grants has been a driving force behind the deals he’s put together in the past year between firms from China and North America. 

“The increased valuation of the asset through a credible China development strategy that has little financial risk increases the overall valuation of the asset, leading to more financing potential,” he added.

But he says a second trend driving deals is the interest of Chinese biotech companies in establishing themselves globally without having to establish global operations.

“Through acquisition of global rights, followed by licensing and third-party financing, a Chinese entity can have a global development plan for their assets without having the burden of global operations,” Wyatt explained.

James Katzaroff, Chairman, Founder & CEO, of Kennewick-based Advanced Medical Isotope Corporation (AMIC), has been engaged in “talks at the highest levels” of Shanghai-based pharmaceutical companies.

Executives of those firms that he says are trying to put together deals with him last week visited the Kennewick headquarters of AMIC, which is engaged in the production and distribution of medical isotopes and medical isotopes technologies.

Those same pharmaceutical leaders, and other executives from China, some with term sheets in hand in quest of formalizing deals, were on hand last week for the Life Science Innovation Northwest, the annual regional biotech showcase.

Chris Rivera, president of the Washington Biotech and Biomedical Association (WBBA) said he expects Locke’s role as ambassador will be “extremely helpful” in bridge some of the challenges of regulations with not just biotech companies “but with trade between the U.S. and China in general.”

Katzaroff, a member of the WBBA board, said he expects Locke will be beneficial to all of Washington tech sectors.

Both Rivera and Katzaroff commented on the effort by Chinese technology parks, particularly in the Shanghai area, to persuade U.S. companies to put their operations in place in their facilities.

Wyatt said that initiative on the part of China tech parks is no longer limited to the major business centers.

“Different provincial governments are giving away tax incentives to get U.S. businesses and investors to be involved in office buildings, medical labs, which means that the Chinese partners are the ones who can take advantage of the tax breaks and bring the benefits to partners,” he added.

Rivera noted that “a lot of basic-research relationships” have developed between entities and academic institutions in the two countries and suggests that further opportunties will develop from those relationships.




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