The US and Chinese national flags flutter in the wind. [Reuters]
The US and Chinese national flags flutter in the wind. [Reuters]

As Washington sharpens its campaign to block China's access to American biotechnology and capital, the global pharmaceutical and biotech industry is recalibrating its strategy in response to mounting pressure on key Chinese players.

Even as the Defense Ministry's designation of Chinese military companies and congressional efforts to stem capital outflows accelerate in tandem, CDMO WuXi AppTec — specializing in synthetic chemistry, small molecules and TIDES — posted record first-half earnings, demonstrating strong resilience.

Washington's biotech containment strategy has evolved beyond the infrastructure-focused Biosecurity Act to encompass measures aimed at cutting off the flow of American capital and intellectual property to China. The Defense Department recently added WuXi AppTec, BGI Group and 186 other companies — 188 in total — to its list of "Chinese military companies" under Section 1260H of the National Defense Authorization Act (NDAA).

The pressure intensified further when the Senate joined the House in introducing bipartisan legislation to subject Chinese biotech investment to strict federal scrutiny. Sens. Elissa Slotkin (D) and Pete Ricketts (R) introduced the Biotechnology Investment National Security Act (BINSA) on Thursday in a bipartisan push. The move follows a similar bill introduced in June by Rep. John Moolenaar, chairman of the House Select Committee on China.

BINSA would add drug development, biopharmaceutical manufacturing and clinical research to the sectors covered by the Comprehensive Outbound Investment National Security Act (COINS), which is designed to prevent American capital from flowing into advanced technology sectors in adversarial nations. If enacted, licensing agreements, joint ventures and equity investments involving Chinese entities would face Treasury Department scrutiny, and the Defense Department would be required to assess the national security implications of US capital flows into Chinese biotech within 60 days. Together, the inbound Biosecurity Act and the outbound BINSA would act as a two-pronged mechanism to simultaneously choke off funding and technology transfers to China's biotech ecosystem.

Despite the political and diplomatic obstacles, WuXi AppTec's interim results for 2026 defied market concerns with a sharp upward trajectory. The company's consolidated sales for the first half of this year reached 28.9 billion yuan ($4.28 billion), while operating profit came in at 13.52 billion yuan — up 38.93 percent and 36.44 percent, respectively, from the same period a year earlier. Net profit for the period also rose 29.43 percent to 11.08 billion yuan.

Growth was driven by the company's core chemistry business and its next-generation modality platform. Sales from the chemistry segment jumped 53.28 percent year-on-year to 24.99 billion yuan, with the oligonucleotide and polypeptide (TIDES) business surging 44.3 percent to 7.26 billion yuan. Analysts attributed the strong performance to sustained demand from global pharmaceutical companies for drug pipeline development and commercial-scale manufacturing, which offset the drag from US-China tensions.

Despite the robust earnings, the legal and geopolitical risks surrounding WuXi AppTec remain a ticking time bomb. The Section 1260H designation is widely seen as a precursor to the final list of "biotechnology companies of concern" under the Biosecurity Act, which the Office of Management and Budget (OMB) is expected to publish by year-end. Under the law's provisions, biotech companies on the Defense Department's Section 1260H list are likely to be automatically included among the Biosecurity Act's companies of concern. WuXi AppTec has filed suit against the Defense Department in the US District Court for the District of Columbia, seeking to invalidate the designation and obtain an injunction, arguing it does not meet the legal criteria for listing.

A key question for global markets is whether WuXi Biologics — WuXi AppTec's former biologics division, spun off and separately listed in 2017 as a dedicated antibody and biopharmaceutical CDMO — will also be swept up in the final regulatory net. The Biosecurity Act explicitly covers not only the headquarters of designated companies but also their affiliates and subsidiaries, meaning the OMB's final list due at year-end will determine the future direction of global pharmaceutical and biotech supply chains.

The shift in global biotech supply chains is creating an unprecedented opportunity for South Korean CDMO and genomics companies. Should the WuXi Group — which derives the overwhelming majority of its revenue from the United States — be fully shut out of the American market through legal and administrative action, major pharmaceutical companies would very likely turn to Korean firms as alternative suppliers.

"If US capital and technology restrictions become a reality, not only will licensing deals with Chinese entities be affected, but the axis of the global CDMO supply chain will rapidly realign," an industry official said. "Korean biotech companies need to closely monitor the shifting regulatory landscape in the US market and proactively build the technological and manufacturing track record needed to fill the gaps in the global supply chain."


silverpaper@heraldcorp.com