As China biopharma continues to evolve, the once dominant model of Western companies seeking opportunities in Asia, a uni-directional relationship, shows signs of giving way to increased bi-directional cooperation between West and East. In the last eighteen months, we have seen two large transactions in which fairly young China companies have made major acquisitions in the US.

First, CRO powerhouse WuXi PharmaTech (NYSE: WX) paid $151 million to acquire AppTec, a company that gave WuXi a footprint in the US and added capability in biologics. Next, medical device maker Mindray Medical (NYSE: MR) made a $250 million purchase of Datascope’s (NSDQ: DSCP) patient monitoring business. The addition gave Mindray considerable synergies and also made the company a major player in the US patient monitoring business.

We expect this reciprocity to remain a trend, driven in part by an increasingly attractive cost environment in the US. Although the economic crisis has hurt nearly everyone, it has had the beneficial effect of reducing the cost disadvantage of doing business in the US, particularly for real estate expense. US real estate prices remain under pressure, with more biopharma space becoming available than is being absorbed, according to a recent report from GVA Kidder Mathews. (Click here to download the report).

Emerging companies are not being aggressive in buying/leasing new space in the US because funding remains very difficult for them. Venture capitalists are dispensing cash very cautiously. Only the money coming from major pharmas serves as a bright spot for funding of young life science companies. Meanwhile, established companies are reducing their space as they focus their energies and capital spending more narrowly.

That is not to say the real estate market for life science space is completely dead – deals are being done, though buyers have the advantage, a turnaround from two years ago. All in all, the situation has made sub-lease deals, even in the biopharma hotspot around San Francisco, very attractive. In fact, as GVA Kidder Mathews points out, space that was leasing at $4 per square foot per month (triple net lease) eighteen months ago can now be found at less than half that rate – below $2 per square foot.

For example, a 355,000 square foot facility currently owned by Bayer Healthcare (NYSE: BAY) near San Francisco is now available. The Hilltop Science & Innovation Campus in Richmond, CA, which includes a previously certified GMP manufacturing facility, is priced at what GVA Kidder Mathews calls “substantially below replacement cost.” The 53 acre site also has an entitlement to build an additional 650,000 of space in an area where building permits are notoriously difficult to obtain. Views of the San Francisco and San Pablo Bays are included, in case you were worried about amenities.

The availability of properties like Bayer’s, including fully fitted lab space ready for move-in, increases the feasibility of China life science companies expanding to the US. In fact, there have also been discussions that someone should take advantage of the availability of low cost space in the Bay Area to open an incubator for China companies that wish to expand their operations into the US’s lucrative market for health sciences.

See our other articles on WuXi PharmaTech, Mindray Medical, and Bayer.

Disclosure: GVA Kidder Matthews is an Official Partner of ChinaBio LLC and the ChinaBio Partnering Forum being held in Shanghai on June 23-24, 2009.  Bayer Healthcare is also a sponsor of the ChinaBio Partnering Forum.