On September 10, reports emerged that the Trump administration was drafting an executive order to impose strict restrictions on Chinese pharmaceuticals, particularly experimental drugs, aimed at curbing China's rapidly developing biotech industry. However, such measures could negatively impact the US pharmaceutical supply chain and patient access to innovative therapies. This potential policy would undoubtedly create a lose-lose situation for the pharmaceutical industry, with secondary markets reacting noticeably to the news.

Following the announcement, pharmaceutical companies experienced varying degrees of stock price declines, including BeiGene (ONC.US), Zai Lab (ZLAB.US), Legend Biotech (LEGN.US), as well as Pfizer (PFE.US), AstraZeneca (AZN.US), and GlaxoSmithKline (GSK.US). BeiGene, which had seen its US stock price surge by a maximum of 103.43% year-to-date, experienced intraday declines of up to 12% on September 10 as investors opted to secure profits amid market uncertainty, though losses narrowed by market close.

Market sentiment recovered quickly. By September 11 close, BeiGene's US shares rebounded strongly, finishing up 6.93% from the previous day. Market confidence was also reflected in capital flows, with Hong Kong Exchange data showing that Capital Group increased its holdings in BeiGene (06160.HK) by 882,648 shares, raising its stake from 4.96% to 5.02%. This indicates that after initial panic, market investors began to objectively assess the limited impact of such policies.

**"Restrictive" Policies May Prove Counterproductive**

The reported draft executive order contains three main elements: 1) threatening to cut off supply channels for Chinese-developed drugs; 2) subjecting transactions where US pharmaceutical companies purchase drugs from Chinese firms to stricter scrutiny; 3) requiring the FDA to conduct more rigorous reviews and charge higher regulatory fees, discouraging pharmaceutical companies from relying on clinical trial data from Chinese patients.

Rather than restricting innovative drug companies' development in the US, this policy draft appears more like leveraging pressure against American multinational pharmaceutical companies (MNCs). Data shows that nearly 200 drugs (including 69 blockbuster drugs with annual sales exceeding $1 billion) are set to lose patent protection. According to Morgan Stanley's latest research, MNCs will face a patent cliff of up to $115 billion by 2035, with a $40 billion gap needing to be filled before 2030.

Chinese innovative drugs, with their research efficiency, cost advantages, and policy benefits, will become a key force in filling the global $115 billion patent cliff. By 2040, China-developed drugs are expected to generate approximately $220 billion in revenue outside China, accounting for 35% of total FDA approvals.

In other words, innovative technology, products, and timing all favor domestic innovative drug companies, with multinational pharmaceutical companies even speaking in defense of Chinese biotech firms. A Jefferies research report noted that the Trump administration's consideration of restrictions on Chinese drugs and experimental pharmaceuticals was influenced by lobbying from certain tech and venture capital investors holding stakes in struggling US biotech startups, who view Chinese biotech as an existential threat.

The opposing camp has support from multinational companies like Pfizer, Merck, and AstraZeneca, which would benefit from Chinese biotech companies' assets and rapid delivery capabilities. Importantly, White House spokesperson Kush Desai stated that the government is not actively considering the draft executive order.

Jefferies analysts believe the US government typically values multinational pharmaceutical companies' perspectives over small biotech companies. Currently, multinationals are defending Chinese biotech companies because they face growing pressure from potential drug pricing declines and blockbuster drug patent expirations starting in 2025. Licensing assets from China can provide multinationals with better cost-effectiveness and more competitive pricing.

Goldman Sachs released a specialized report on September 11 providing in-depth analysis of the Trump administration's proposed drug review policy. For companies like BeiGene and Legend Biotech that have established solid foundations in the US market, Goldman Sachs believes the policy's impact on stock prices is minimal, with limited short-term volatility.

Additionally, Leerink Partners analyst David Risinger stated in a client report that "plans to restrict US biopharmaceutical companies from licensing or acquiring assets in China could ultimately prove counterproductive."

**Market Volatility Cannot Stop Long-Term Value Release**

Despite sudden market volatility, innovative drugs remain a favored sector this year among multiple institutional investors. Southwest Securities noted that Hong Kong-listed innovative drug sector profits turned positive for the first time in the first half of this year. The innovative drug industry has entered a new cycle driven primarily by profitability, with fundamentals showing a clear inflection point.

CITIC Securities research indicates that the uptrend in A-share and Hong Kong pharmaceutical sectors is far from over, with the main upward wave expected to continue over the medium to long term. The firm recommends continued focus on innovation-driven areas and internationalization + autonomous control + out-of-hospital marketing model reforms in the second half, particularly emphasizing sector leaders with strong domestic demand certainty and achievable performance.

Guotai Haitong Securities reported that innovative drug companies' 2025 interim report quality has comprehensively improved, with increasing numbers of products launching and entering national medical insurance. The first commercial insurance innovative drug catalog is expected to be released in the second half, with domestic commercialization revenue for innovative drugs continuing to climb rapidly.

Regarding Trump's draft executive order, Guotai Haitong Securities emphasized in its latest research that, referencing US pharmaceutical tariffs and most-favored-nation pricing policies, the executive order would be difficult to implement. The firm continues to strongly recommend BeiGene, optimistic about the company's zanubrutinib and other hematological oncology pipeline global sales progress, and bullish on solid tumor pipelines including CDK4 and B7H4 ADC. The firm believes that innovative drug companies' continuously improving product quality and global competitiveness remain unchanged facts.

**Summary**

Currently, regardless of whether the Trump administration's draft proposal might face judicial review challenges that could prevent implementation, the data clearly shows that biotech companies are reshaping the global biopharmaceutical innovation landscape. Low-cost, high-efficiency innovative assets have become important solutions for MNCs to combat patent cliffs. For innovative drug companies, their global value will not disappear due to policy decrees but may accelerate in the growing demand for global collaboration.