US bill targeting China biotech faces low odds, Citi says

The National Security Biotechnology Investment Act of 2026 would amend the Comprehensive Outbound Investment National Security Act to require Treasury review of US investment in Chinese biotech, threatening cross-border dealmaking between the world's two largest pharmaceutical markets.

"The probability of this legislation being passed is low," Citi analysts wrote in a June 3 research report, drawing a parallel to the Biosecure Act, which passed in a much milder form after triggering market volatility. The bank cited three reasons: the bill would limit US companies' access to Chinese innovation, weaken their competitiveness against European and Japanese rivals, and faces strong opposition from US pharmaceutical firms and investors.

Hengrui Pharma (01276.HK) fell 7.1% to HKD54.7 on turnover of HKD697 million, the steepest drop among the four stocks Citi recommends. CSPC Pharma (01093.HK) declined 4.2% to HKD7.25 with HKD896 million in turnover, while Ascentage Pharma (01672.HK) lost 3.8% to HKD9.94 and Innovent Bio (01801.HK) slipped 2.5% to HKD76.85. The selloff erased roughly HKD15 billion in combined market value across the four names.

If enacted, the bill would restrict business development transactions, joint ventures and equity investments between US and Chinese pharmaceutical companies — a channel that has generated billions of dollars in licensing fees and milestone payments for Chinese biotechs. Citi said it still expects multiple positive catalysts in 2026, including strong earnings, more BD deals and progressive clinical trial readouts, calling the selloff a buying opportunity.

A $40 Billion Cross-Border Pipeline at Risk

The proposed legislation targets a sector where cross-border dealmaking has accelerated sharply. Chinese biotech companies signed licensing agreements worth more than $40 billion with global pharmaceutical firms between 2020 and 2025, according to industry data, with US companies accounting for roughly half of that total. A mandatory screening requirement would add months of review to each transaction, potentially deterring US firms from pursuing partnerships with Chinese counterparts.

The bill's path to enactment faces significant hurdles. The COINS Act, which the new legislation seeks to amend, was itself the product of contentious negotiations and passed only after its scope was narrowed. Citi's comparison to the Biosecure Act — which ultimately emerged in a watered-down form — suggests investors may be overreacting to the headline risk. The bank maintained buy ratings on all four stocks, signaling confidence that the regulatory overhang will dissipate.

History Suggests the Bill Will Be Watered Down

The last major US legislative effort to restrict investment in Chinese technology — the 2022 CHIPS and Science Act's outbound investment provisions — took more than 18 months to finalize and ultimately covered a narrower set of technologies than initially proposed. The Semiconductor Industry Association's successful lobbying campaign to limit the scope of those rules offers a precedent for the pharmaceutical industry's current pushback.

Citi kept its preferred Hong Kong-listed names unchanged, including Hengrui Pharma, CSPC Pharma, Ascentage Pharma and Innovent Bio. The bank said geopolitical tensions have weighed on China's biotechnology sector but argued that strong earnings, more BD transactions and progressive clinical trial data readouts will drive a rebound.

This article is for informational purposes only and does not constitute investment advice.