The Risks of Foreign Investment in U.S. Life Sciences Companies — Why Founders Should Take Heed

In recent years, Chinese investment in U.S. and global biotech and medtech has increased significantly. These partnerships can serve as strategic footholds, raising complex questions around security, sovereignty, and long-term strategy.

Consider Grand Pharmaceutical Group, also known as Yuanda Pharmaceutical and Grand Pharma, which jointly acquired Australian firm Sirtex Medical, forged a nuclear medicine collaboration with Sirtex Medical U.S., and took an 87.5% stake in BlackSwan Vascular, a U.S.-based developer of vascular embolization technologies.

On the surface, Grand Pharma looks like a modern success story. Hu Kaijun, a Chinese billionaire, holds a majority stake in Grand Pharma, positioning him as a key figure in the company's global expansion in the life sciences sector. Under his leadership, Grand Pharma has diversified its portfolio through strategic acquisitions and collaborations, enhancing its presence in the international market.

But for U.S. life sciences stakeholders, don't be misled: Grand Pharma's rise isn't just a story of business savvy—it's a case study in how state-backed capital can reshape a company. And for founders, it's a reminder that funding sources can carry strategic baggage.

Grand Pharma's aggressive expansion may reflect a broader trend of Chinese firms investing in advanced markets to access Western R&D and expand China's presence more deeply in the future of global biomedical innovation—a trend that raises serious concerns for U.S. interests.

From State-Owned Roots to Global Reach

Through strategic investments and collaborations, Kaijun and Grand Pharma continue to expand their footprint, resulting in the transfer of cutting-edge medical technologies from European and U.S. startups to China.

Behind Grand Pharma's rapid rise lies a more complex history—one that raises questions about influence, oversight, and strategic intent.

Before Grand Pharma was a global healthcare investor, it was a modest state-owned enterprise (SOE) in China under the purview of the Poverty Alleviation Office. Its mission: deliver pharmaceutical products as a public good, not a profit engine. But in the late 1990s and early 2000s, that began to change.

A 2013 investigation by China Finance (CNFINA) suggested that Kaijun played a significant role in transforming the SOE into China Grand Enterprises through a series of complex transactions that have raised questions about corporate governance and asset valuation.

One notable transaction highlighted in the CNFINA report involves Yanhuang Real Estate, a private firm not previously affiliated with the company. The firm purchased 50% of China Grand Enterprises from two state-owned shareholders for 50 million yuan. This transaction was justified using China Grand's initial registered capital of 100 million yuan. However, estimates based on the net assets held by China Grand at the time suggested that those shares were worth at least 145 million yuan, indicating a potential undervaluation of approximately 95 million yuan.

The CNFINA report details that two additional state-owned entities transferred their 50% stake to four private investment firms, including Beijing Taihua Yongchang Investment and Beijing Dongfang Weichuang, for similarly underpriced amounts based on outdated registered capital. CNFINA's analysis estimated the value of these two transfers combined to have resulted in a total undervaluation of over 218 million yuan.

This suspicious restructuring is significant because it offers a window into how power and capital were initially consolidated, and under what terms. Transactions that undervalue assets and move them out of public hands raise fundamental concerns about transparency, governance, and intent. When such origins lead to foreign acquisitions in sensitive sectors like biotechnology, it becomes even more important to scrutinize the business culture and strategic motivations behind the capital. In short, where the wealth comes from and how it was made offer important clues into how business leaders operate their companies.

The Fine Print of Chinese Capital

For U.S. life sciences startups, the lesson is clear: capital isn't neutral. The wrong investor can bring not just regulatory headaches but long-term strategic consequences. A growing list of cases tells a cautionary tale.

Sirtex Medical

When Grand Pharma and CDH Investments outbid Varian by a reported 20% to acquire Sirtex Medical, observers raised questions about the surprisingly high acquisition price. Through its subsidiary Chengdu Shetai, Grand Pharma has since leveraged Sirtex's platform to accelerate its development of nuclear medicine therapies. In cases of majority foreign ownership, especially by companies with potential state affiliations, it invites questions about data governance, manufacturing control, and regulatory visibility.

More Lessons from BGI, WuXi, and Others

Grand Pharma isn't the only example. Chinese biotech giants like BGI Group and WuXi AppTec have drawn attention in recent years over concerns related to data use, military ties, and participation in U.S. research networks. These cases underscore a growing sensitivity: capital flows from companies with strategic state interests may pose challenges in sensitive sectors like life sciences.

A recent TechTimes article breaks down the core risks facing U.S. life sciences companies in the face of growing Chinese investment, from academic partnerships enabling access to sensitive research to financial ties that quietly shift control, and nefarious enterprises evading regulatory scrutiny. The piece argues that while the proposed BIOSECURE Act legislation is a step in the right direction, it lacks the enforcement teeth needed to truly safeguard American innovation in the life sciences sector.

Ultimately, U.S. biotech and medtech startups must take proactive responsibility for who they partner with because policy alone won't protect what's not carefully guarded from the start.

A Critical Reminder for Founders and CEOs: Capital Comes with Consequences

U.S. life sciences startups face an increasingly complex landscape. Fast, global capital may seem like an obvious win, but it can introduce long-term complications. These include heightened regulatory oversight, potential deal restrictions, and reputational considerations. As geopolitical tensions evolve, particularly between the U.S. and China, biotech and medtech are emerging as points of scrutiny.

In an interview on Chinese firms facing U.S. Commerce Department action related to AI, Gordon Chang, a senior fellow at the Gatestone Institute and a specialist on U.S.-China relations, stated, "all Chinese companies are a threat." While his comment was made in the context of national security and advanced technologies, it reflects a broader concern among some policymakers and analysts: that Chinese firms, regardless of sector, may operate with implicit state alignment, especially when national strategic interests are involved. For biotech and medtech companies, choosing the right partner now depends as much on who they are as what they offer.

For the foreseeable future, U.S. startups should approach foreign investment, especially from state-influenced entities, with caution and care. This isn't just about one company or one country. It's about building resilient innovation ecosystems that can withstand geopolitical shifts while preserving trust, competitiveness, and scientific integrity.