(Bloomberg) -- Shanghai pledged millions of dollars over five years to reward Chinese drugmakers that break into global markets, a bid to provide funding support to a biotech industry grappling with falling investment.
The municipal government will give up to 100 million yuan ($13 million) each to companies based in the city that make progress developing novel therapies, according to a document outlining support for Shanghai’s health care industry.
Shanghai will also provide a cash reward of up to 10 million yuan for drugmakers whose therapies or medical devices get approval from foreign regulators.
Companies that strike deals to co-develop their own drug candidates with global partners are eligible for up to 5 million yuan in support, the document said. The support measures go into effect next month.
Chinese drugmakers are struggling with a funding crunch fueled by a stock market downturn and pullback by international investors concerned by rising geopolitical tensions. Investment by venture capital and private equity firms dropped to $3.4 billion last year from a peak of $12.4 billion in 2021, according to data compiled by L.E.K. Consulting.
Shanghai authorities plan to mobilize state-backed funds to invest in biotech companies with strong drug pipelines, and provide favorable terms when extending loans to health care firms, according to the document. The megacity, China’s financial hub, is home to numerous domestic biotech firms and western drug giants’ regional research centers.
China’s central government this month signed off on measures aimed at stimulating homegrown biotech innovation that have drawn interest from global pharmaceutical giants and scrutiny from US lawmakers bent on cutting Chinese companies from drug supply chains.
Details of those measures have yet to be published. Market speculation about governnment support sparked a short-lived health care stock rally earlier this year.
As they face difficulties raising money from investors, some Chinese biotech companies have sought to strike deals with western drugmakers to co-develop their experimental therapies abroad, in exchange for upfront payments. Deals can potentially balloon into multi-billion-dollar transactions if homegrown Chinese drugs succeed in global clinical trials and secure approval in markets like the US and Europe.
Medical device makers are also eligible for up to 30 million yuan if their products get domestic approval and begin manufacturing. Chinese companies contracted by drugmakers to test medicine in clinical trials aligned with global standards can also get up to 100 million yuan in support, according to Shanghai’s document.
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