Biotech Values

[DewDiligence]

Re: Chinese sourcing of API

When federal drug regulators discovered that Baxter’s product had been contaminated by Chinese suppliers, the F.D.A. banned Baxter’s product and turned almost exclusively to the one from APP. But APP also got its product from China. So for now, like it or not, China has the upper hand. As Mr. Polastro put it, “If China ever got very upset with President Obama, it could be a big problem.”

This is intentionally histrionic, IMO. A cut-off the Chinese API supply would be a big program, but only temporarily. The API business is not based on proprietary knowhow, but rather on rock-bottom labor costs; hence, many API could be transferred to non-Chinese sources during a geopolitical crisis, albeit with some interruption in production.