CFIUS waiting game

How CFIUS expansion could adversely affect U.S. biotechs raising foreign capital

Biotech and its investors must wait to find out how much of the industry will be caught up in the CFIUS dragnet of foreign investment in American companies, but the U.S. Treasury has given itself the latitude for a broad-brush approach.

It could take six months to learn the scope of the new rules, and longer to understand how they will be applied, but the early view is that they could choke the flow of funds from non-U.S. VCs to early stage U.S. biotechs and limit the ability of Chinese companies to in-license biomedical innovations.

The purview of the Committee on Foreign Investment in the United States (CFIUS) has been to review transactions in which a foreign entity acquires a majority stake in a U.S. company for any concerns related to national security.

That role was expanded Oct. 10 when the U.S. Treasury launched a pilot program under which CFIUS will review all foreign investments in U.S. companies within 27 industries when the deal gives specific rights to the foreign investor and the technology is deemed to be “emerging and foundational.”

Such restrictions on foreign investments are not new elsewhere in the world; for instance, China has its own “negative list” of industries or technologies in which foreign investment is restricted or prohibited.

In parallel to the new

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