Around the time Indian and Chinese diplomacies were flexing their arms in July, a tiny research company in Noida in the National Capital Region was making up its mind. To take or not to take. Finally, it chose not to take funding from a Chinese pharmaceutical company. And the reasons were far from smouldering geopolitical tensions.

In the rarefied business of drug discovery, Curadev has a few molecules under development. Two years ago, it licensed one set to Roche for $25 million in upfront payment and is once again in the market to strike out a deal for new ones. A potential customer it was engaging with was a pharma company from Central China.

“We did not pursue our options in China for reasons that were both geographical in nature and technical,” says Arjun Surya, co-founder and Chief Scientific Officer of Curadev. “There was keen interest in further developing two of Curadev’s programmes and the commercial terms being discussed were good, especially given how hard it is to raise funding in India for the kind of stuff we do.”

There’s no risk capital in India for discovering new drugs, neither among investors nor within pharma companies, but China has. Plentiful.

On 18 September, one of China’s most acquisitive conglomerates, the Fosun Group, finally closed a deal with Gland Pharma paying $1.1 billion for a 74% stake in the Indian drug company which largely makes injectables, and for exports.

As these two deals met their logical ends, noises emanated from New Delhi. The draft of the new pharmaceutical policy released in August is loud and clear on curbing imports from China and also talks of a few ill-planned moves. In the last decade, as Indian pharma grew its generics exports to regulated markets like the US and EU, China captured the raw materials market, of Active Pharmaceutical Ingredients (APIs) and intermediates. Upwards of 60%, both globally and in India. Now the dependence is so high that the Prime Minister’s Office has raised it as a security concern. But it isn’t as black and white as it is made out to be in public understanding. Nor is the solution as simple as the bureaucrats have laid in the new pharma policy.

Reinvent or re-engineer?

In September, many API importers in India received communications from their Chinese suppliers: Between October 2017 and March 2018, the Chinese government would be pulling out all stops to control air pollution in Northern China and it would impact their supply and price of APIs and intermediates. Any Chinese company violating the clean-up would have to shut operations. So, Indian buyers better bolt-on.

This email from a Chinese supplier sheds light on multiple things: That China is very serious about cracking down on polluting industries of which chemicals and APIs are a big part.