Amid the backdrop of heightened economic tension between China and the United States, U.S. regulators are demanding Chinese firm iCarbonX divest its majority ownership position in patient social media company PatientsLikeMe.
Because of the mandated divesture, PatientsLikeMe is being forced to find a new buyer for the company.
The news, first reported by CNBC, comes a few months after the Trump Administration announced new rules to review foreign investments that could be considered a threat to national security or U.S. technological superiority.
Under the program, the Committee on Foreign Investment in the U.S. (CFIUS) has expanded power in a number of key industries to block investments, levy financial penalties or reverse transactions.
The committee has had a role in blocking a number of notable business deals, but was previously limited only to investments where foreign companies took a majority stake in a company.
PatientsLikeMe was founded in 2006 to connect patients with the same disease or condition, provide them a platform to share their experiences and treatments and generate real-world patient data in the process. The company aggregates and sells the data to healthcare companies for revenue.
Chinese genomics company iCarbonX took a stake in Cambridge, Massachusetts-based PatientsLikeMe as part of a $100 million deal in 2017 that was meant to combine patient data with the bioinformatics expertise of iCarbonX.
“The ecosystem we’re creating will connect biology, experience and AI so that we can learn how diseases manifest in the body over time, and how our everyday actions contribute to their progression,” iCarbonX founder Jun Wang said at the time. “PatientsLikeMe will be at the core of this ecosystem as we digitize, analyze and share insights and knowledge that can improve lives.”
According to CNBC, it expanded its position later in the year to become the company’s majority shareholder. The company was initially alerted to CFIUS concern about the investment last year.
According to the PatientsLikeMe website, both Wang and iCarbon Chief Investment Officer Cindy Yang sit on the company’s board of directors.
Scrutiny over the two companies’ relationship is likely tied to foreign control of sensitive user data. A few weeks ago news broke that the CFIUS was forcing the sale of gay dating app Grindr by its Chinese owner Beijing Kunlun Tech after determining that foreign ownership constituted a national security risk.
Intensifying CFIUS review could act as an additional red flag for Chinese investors interested in the U.S. market, especially as the committee’s purview expands into smaller deals and acquisitions.
Chinese foreign direct investment has precipitously slowed from its record high in 2016 as the trade conflict between the two countries has ramped up.
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