A US medical startup has accused a Chinese company of malicious investment, attempting to control its core technology and stifle the company’s development. American national security hawks have pointed out that this case exposes dangerous loopholes in US export and investment policies.
According to a report from The Wall Street Journal on Wednesday, in 2021, Scott Nelson, a senior executive in the pharmaceutical industry, co-founded FastWave Medical, a startup in Minnesota, with others to develop medical devices for treating vascular calcification diseases.
Nelson aimed to develop a better device to treat calcium deposits on blood vessel walls, improving blood circulation to the heart or legs. It was revealed that one of the co-founders of the company had ties to a Chinese pharmaceutical company called Yuanda Pharma, which was also investing in other US medical and health startups. As a result, negotiations began between Nelson and Yuanda Pharma.
An agreement was reached where a subsidiary of Yuanda Pharma would invest $12 million in FastWave in exchange for approximately 40% equity, 2 board seats, and significant influence over major strategic decisions.
However, problems started to arise at the end of 2022. Yuanda Pharma refused to fulfill the promised additional investments, leading FastWave to face financial strain. By that time, FastWave had already invested in equipment development for the Chinese market as requested by the Chinese company.
In 2023, FastWave barely managed to secure funds to sustain operations, but Yuanda Pharma declined to approve FastWave’s next crucial round of financing, which was essential for completing clinical trials and ultimately selling the product.
In 2024, despite FastWave finding multiple willing investors, Yuanda Pharma demanded $150 million as a condition for approval, effectively blocking the financing.
In early 2025, Nelson discovered that Yuanda Pharma had partnered with another Chinese company to develop “similar” medical equipment to FastWave’s.
In May, FastWave officially applied to the Committee on Foreign Investment in the United States (CFIUS) to review Yuanda Pharma’s initial investment, hoping that the committee would require the company to divest or strip it of some shareholder rights.
“They [referring to Yuanda Pharma] are basically suffocating us,” Nelson told The Wall Street Journal, pointing out that this was a carefully planned conspiracy aimed at destroying the startup and gaining control of the technology.
This case has drawn significant attention from members of Congress.
John Moolenaar, chairman of the House China Task Force and Republican representative from Michigan, told The Wall Street Journal, “FastWave’s experience once again warns us that China is utilizing a coordinated strategy to steal US technology.”
The committee has informed CFIUS that allowing Beijing to control FastWave’s laser-related technology would pose risks for the United States, as this technology could have semiconductor or military applications.
Some experts cautioned that when US companies bring in foreign capital, they must strengthen due diligence and security measures to prevent malicious foreign companies from stealing US innovation opportunities.
Nelson admitted that if a funding solution is not found by the end of the year, he is prepared to shut down the company. However, his biggest concern is that even if the company closes, it will not prevent Yuanda Pharma from ultimately gaining control of the technology.
“This is definitely intentional and part of their strategy,” he said.