The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Refiles to change first graphic to interactive.

By Katrina Hamlin

HONG KONG, June 9 (Reuters Breakingviews) - The U.S. wants to wean itself off a growing dependence on Chinese pharmaceuticals. The Pentagon’s decision on Monday to add $43 billion WuXi AppTec 603259.SS, 2359.HK to a list of companies it believes have military connections may be a small step. But it’s a warning China Inc’s access to the $500 billion market is in jeopardy.

WuXi's Hong Kong-listed shares fell 5% on Tuesday as shareholders contemplated the impact on its U.S. business, accounting for 70% of its 45 billion yuan ($6.6 billion) of revenue last year. It opens the door to authorities labelling WuXi a “company of concern” under the new Biosecure Act, which prohibits federal government departments and agencies from purchasing services and from extending loans and grants. That could repel potential partners.

Yet pushing WuXi away from the U.S. market will be painful for local drugmakers and patients. The company, offering everything from research to clinical trials, is involved in the production of about a quarter of medicines used in the U.S., per a 2024 report from Health-ISAC, an industry group focused on health security. WuXi's work contributed to the development of blockbuster products for conditions from cancer to cystic fibrosis.

The logic is that if the U.S. doesn’t curb the role of Chinese players like WuXi, Beijing can weaponize supply chains by restricting access – a playbook it used with rare earths, for instance.

If policymakers deem that threat outweighs the benefits of cooperation, there will be more to come. Last week Republican Congressman John Moolenaar and Democrat counterpart Debbie Dingell introduced legislation aiming to restrict U.S. investment into China's biotech industry. The U.S. International Trade Commission is also investigating the impact of Chinese state support for the sector.

For now, biotech supply chains keep globalising. The clearest sign of that is the boom in outlicensing deals, in which Chinese biotech firms grant global players the right to develop and commercialise drug discoveries outside their home market. Their value has grown every year since 2019, rocketing 160% to $138 billion in 2025, per PharmCube, with the U.S. accounting for half of the total. This year, companies have already struck $87 billion-worth of such agreements, including Pfizer's PFE.N $10.5 billion cancer drug deal with Innovent Biologics 1801.HK last month.

But the market is starting to price in more risk. Hong Kong’s biotech index is down 17% year-to-date, underperforming both the city's benchmark and the Nasdaq Biotech Index. WuXi’s headache could be catching.

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CONTEXT NEWS

The U.S. on June 8 added companies including WuXi AppTec to a list of those it believes are aiding China's military.

Known as the 1260H or CMC list, it does not formally impose sanctions on Chinese firms. But a recent U.S. law severely restricts what the Department of Defense is allowed to do: as of later in June, it wil be prohibited from contracting directly with those on the list, and starting next year will not be allowed to buy their products or services from third parties, either.

Inclusion on the list could also lead to WuXi AppTec being classified as a "company of concern" under the Biosecure Act, which prohibits the federal government and related agencies from purchasing biotech equipment and services or extending loans and grants to such organisations.

A WuXi AppTec spokesperson told Reuters that the company's inclusion on the list was "clearly a mistake" and that it would take immediate actions to "correct this erroneous designation."

WuXi AppTec’s Hong Kong- and Shanghai-listed shares fell around 5% and 4% respectively in morning trade on June 9.