US proposes curbs on investment in Chinese biotech firms

The Trump administration is seeking to restrict American investment in Chinese biotechnology companies, potentially complicating financial ties at a time when US drugmakers are increasingly turning to China for new medicines. The Treasury Department on Thursday proposed adding biotechnology to a list of sensitive technologies subject to investment limits involving foreign adversaries, citing national security concerns. The proposed regulations would require American investors to notify the government about certain transactions involving foreign companies developing sensitive technologies and prohibit others entirely. The rules would expand an existing program targeting investments in areas including artificial intelligence, semiconductors and quantum computing. The move represents the latest escalation in Washington's efforts to rein in China's biotech advances. Last year, Congress passed the Biosecure Act to restrict federal agencies and government-funded companies from using or procuring services from designated Chinese biotech firms, although the restrictions were weaker and narrower than initially proposed. Shares of Chinese biotech companies fell, with Genscript Biotech Corp. dropping as much as 14% in Hong Kong. Insilico Medicine Cayman TopCo slid 5.2%, Duality Biotherapeutics Inc. fell 3.9%, CSPC Pharmaceutical Group Ltd. lost 3.4%, Jiangsu Hengrui Pharmaceuticals Co. declined 3% and Innovent Biologics Inc. slipped 2.2%. The US tightening comes as Beijing is also adjusting its own approach. In a sign of biotechnology's growing strategic importance, China last week proposed adding several biomedical technologies to its export-control list -- though its plan explicitly allows licensing deals for drugs to continue. Chinese biotechnology companies have become a source of innovation for the pharmaceutical industry. US drugmakers are increasingly turning to China to license promising treatments as they search for new products to replenish their pipelines. Licensing deals aren't expressly prohibited under Washington's proposed rules, according to Duane Wright, senior healthcare policy analyst at Bloomberg Intelligence. The restrictions won't take effect until that process is complete. Wright said the Treasury proposal begins with a "very broad definition" of biotechnology -- covering small molecules, biologics, vaccines and cell and gene therapies -- but leaves room to narrow the pharmaceutical provisions after stakeholder comments. Transactions such as equity investments and joint ventures are most clearly affected, he added. "This is still the opening stage of the rule-making, so the scope could change before the rule is finalized," Wright said. The proposed regulations would also restrict investment in Chinese brain-computer interface companies, a growing field of startups that aim to build technologies that allow people to control electronics directly with their brains. China and the US both have burgeoning brain tech industries, with startups racing to develop implants, helmets and other devices. Industry groups including the Pharmaceutical Research and Manufacturers of America, the Biotechnology Innovation Organization and Incubate, a coalition of life sciences venture capital investors, warned that an overly broad approach could create unintended consequences for American biotech companies and public health. "The details of the proposed Treasury Department rules matter," John Crowley, president of BIO, said in a statement. "We cannot restrict our way to success."