Moderna Is Gambling on China as Other U.S. Companies Pull Back
In a bold move that contrasts sharply with the retreat of many U.S. companies from the Chinese market, Moderna has made a significant decision to deepen its investments in China. The biotechnology firm announced in 2023 that it would initiate research, development, and manufacturing activities in China using its groundbreaking messenger RNA (mRNA) technology, the same technology that yielded its highly effective Covid-19 vaccine.
Moderna’s Entry into the Chinese Market
Moderna’s CEO, Stéphane Bancel, revealed that the initial news of their agreement with Chinese local authorities surfaced through a Chinese media outlet before the company had a chance to formally announce it. “We never communicated about China,” Bancel stated. “The Chinese government did.” With many Western corporations pulling back from China amid rising tensions, Moderna stands out as a company willing to plant roots in the lucrative Chinese pharmaceutical arena.
Market Potential and Strategic Concerns
The allure of the Chinese market, which is worth over $311 billion and experiencing annual growth of approximately 7%, is undeniable. Despite facing significant political challenges—both in the U.S. and China—Moderna sees the potential for substantial revenue growth, especially as sales of its Covid-19 vaccine decline in the U.S. and the launch of its new RSV shot has been sluggish.
However, ventures into China are complicated by geopolitical relations and concerns regarding intellectual property theft. While Bancel assures that Moderna will not transfer its proprietary mRNA technologies to Chinese entities, he acknowledges the necessity of heightened cybersecurity measures. “We know it’s easier to steal data online than a piece of paper in somebody’s closet with a good lock,” he remarked, indicating the risks the company faces.
Moderna’s Security Measures and U.S. Political Pushback
To safeguard its innovations, Moderna has implemented stringent layers of protection against cyber threats for its operations in China and other global markets. However, these efforts haven’t shielded the company from criticism. Influential lawmakers, such as Senator Marco Rubio, have expressed concerns regarding Moderna’s decision to engage with a country they view as a potential threat to U.S. interests. Rubio condemned the company’s actions, stating that Moderna’s partnerships may inadvertently assist hostile entities by granting them access to crucial technologies developed with substantial U.S. taxpayer funding.
“The geopolitical tension is not helping us,” Bancel noted, reflecting on the increasingly complicated landscape for foreign firms in China. He characterized the current environment as much more difficult than it was five years ago, emphasizing that caution and careful planning are paramount for the firm moving forward.
Progress in China
Despite the criticism, Moderna is advancing on several fronts in its Chinese endeavors. The Chinese government has extended overtures to foreign pharmaceutical companies, highlighting its openness to collaborations that address healthcare needs. Recent dialogues between Chinese officials and Moderna have indicated a willingness to resolve bureaucratic hurdles swiftly, possibly facilitating smoother entry into the Chinese market.
In an effort to augment its research capabilities, Moderna has entered into a partnership with Shanghai-based CARsgen, focusing on innovative experimental cancer treatments. This collaboration aims to evaluate the effectiveness of a new mRNA-based cancer vaccine in conjunction with CARsgen’s CAR-T therapy against gastric and pancreatic cancers.
Manufacturing Plant and Regulatory Approvals
As part of its strategy to establish a foothold in China, Moderna has initiated preliminary site work for its first manufacturing plant in Shanghai as of November 2023 and is actively engaged in discussions with Chinese regulatory authorities concerning the approval of its Covid-19 vaccine.
“There is a strong belief that we could help people in China,” Bancel remarked about the humanitarian rationale propelling Moderna’s ambitions in China. His comments suggest that beyond sheer profitability, the firm may be motivated by the need to contribute to global healthcare advancements, particularly in mRNA technology.
Conclusion
Moderna’s commitment to the Chinese market entails both significant risks and opportunities, as the company seeks to navigate an intricate web of regulatory, political, and competitive challenges. While its peers may be retreating, Moderna’s move serves as a calculated gamble, positioning the company to capitalize on the vast potential of one of the world’s largest pharmaceutical markets while grappling with the existing geopolitical landscape.
