The NDAA introduces a "reverse CFIUS" policy requiring US investors to notify or seek permission before investing in foreign companies in sensitive sectors. While biotech is not yet included, this framework could be extended, significantly impacting global venture capital strategy.
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The SBIR/STTR programs, a vital source of non-dilutive funding for early-stage biotechs, remain on pause with no clear path to reauthorization. The logjam is due to a niche debate between a few members of Congress over foreign-funded company eligibility, stalling the entire program.
The National Defense Authorization Act (NDAA) has elevated biotech to a national security asset, alongside AI and quantum computing. This shift creates new funding opportunities through a dedicated Department of Defense (DOD) biotech office, distinct from traditional NIH grants.
Unlike the NIH's science-driven approach, the Department of Defense's new biotech funding priorities will be reactive to geopolitical threats. The DOD will invest in areas where China is perceived to be advancing, such as synthetic biology and biologic data security, rather than funding basic research.
China has developed a first-rate biotech effort, enabling U.S. firms to buy or license preclinical assets more efficiently than building them domestically. This creates an arbitrage opportunity, leveraging China's R&D capabilities while relying on U.S. expertise and capital for global commercialization.
As CFIUS reviews increasingly complicate US venture investment in Chinese companies, investors are seeking alternatives. South Korea is emerging as a key "CFIUS-safe" location, offering access to high-quality, early-stage healthcare assets without the geopolitical and regulatory risks associated with investing in China.
An ideologically driven and inconsistent FDA is eroding investor confidence, turning the U.S. into a difficult environment for investment in complex biologics like gene therapies and vaccines, potentially pushing innovation to other countries.
The updated Biosecure Act replaces a fixed list of sanctioned Chinese firms with a dynamic designation process controlled by the administration. This shifts risk for U.S. biotechs from a known quantity to an unpredictable political process, where any Chinese partner could be deemed a "company of concern" at any time.
The Biosecure Act will establish two distinct lists of prohibited foreign biotech partners: a DoD-managed list (1260H) and a more subjective White House list. Companies receiving any federal funds must navigate both lists, adding significant compliance complexity for supply chains.
Unlike its predecessor, the likely-to-pass Biosecure Act 2.0 doesn't name specific companies like WuXi AppTec. Instead, it grants the administration discretionary power to define "companies of concern" and the resulting market consequences. This ambiguity leaves biopharma companies uncertain about future supply chain partners and market access, creating a prolonged period of strategic risk.
The industry's negative perception of FDA leadership and regulatory inconsistency is having tangible consequences beyond investment chilling. Respondents report actively moving clinical trials outside the U.S. and abandoning vaccine programs. This self-inflicted wound directly weakens America's biotech ecosystem at the precise moment its race with China is intensifying.
