China’s Order 818: A New Commercialization Pathway Reshaping Cross-Border CGT Licensing and Investment

China now allows the commercialization of certain advanced therapies without requiring traditional drug registration through the National Medical Products Administration (NMPA). Order No. 818, formally titled the Regulations on the Administration of Clinical Research and Clinical Translation and Application of Biomedical New Technologies, effective May 1, 2026, establishes a dual-track framework for biomedical innovations in China, with a traditional NMPA pathway and a parallel pathway for the clinical study, translation, and commercial application of “biomedical new technologies,” creating both opportunities and significant challenges for multinational pharmaceutical companies (MNCs) and cross-border dealmakers.

Most cross-border cell and gene therapy (CGT) deals signed in recent years did not anticipate this shift. If you have licensed an asset to or from a Chinese partner, your milestone triggers, intellectual property provisions, and commercialization strategies may need immediate reexamination.

KEY TAKEAWAYS

• First, Order 818 creates a parallel commercialization pathway: Technologies acting at the cellular or molecular level, such as personalized cell therapies, gene editing applications, brain-computer interfaces, and xenotransplantation, can now be clinically translated and commercially applied within qualified hospitals without going through the traditional NMPA drug registration process. Hospitals are permitted to charge patients for these treatments.
• Second, existing licensing agreements may be misaligned: Standard cross-border licensing agreements typically tie milestone payments to NMPA regulatory milestones, including investigational new drugs (INDs), new drug applications (NDA), or marketing authorization. If a Chinese licensee opts for the Order 818 pathway, these milestones may never be triggered, even as the licensee generates substantial commercial revenue.
• Third, foreign investment restrictions remain a critical barrier: China’s 2024 Foreign Investment Negative List continues to prohibit foreign investment in CGT development and application at the national level. While pilot relaxations have been introduced in four free trade zones (Beijing, Shanghai, Guangdong, and Hainan), these are explicitly limited to the NMPA product registration route. Whether foreign-invested enterprises can access the Order 818 technology translation pathway remains a significant grey area.
• Fourth, human genetic resources and export controls add complexity: The Order 818 pathway requires deep hospital-enterprise collaboration, which triggers compliance obligations under China’s Human Genetic Resources (HGR) regulations and technology export control rules. MNCs must carefully structure data-sharing arrangements and conduct thorough export control diligence before acquiring or licensing Chinese CGT assets developed under this framework.

THE DUAL-TRACK SYSTEM: UNDERSTANDING THE NEW FRAMEWORK

What Changed

Historically, any therapeutic intervention intended for commercial use in China required NMPA approval as a drug or medical device. This process typically takes five to eight years and requires extensive clinical trials. Order 818 introduces a fundamentally different pathway.

Under the new framework, “biomedical new technologies” are defined as medical professional methods and measures that apply biological principles, act at the cellular or molecular level on the human body, and have not yet been applied clinically within China (Article 3). The regulation centralizes oversight with the National Health Commission (NHC), which is responsible for the nationwide supervision and management of both clinical research and clinical transformation applications of new biomedical technologies (Article 6).

The Technology Translation Pathway

The most commercially significant feature of Order 818 is the “clinical translation and application” mechanism. Once a biomedical new technology has completed clinical research and demonstrated safety and preliminary efficacy, the sponsoring institution can apply to translate it into clinical application at qualified hospitals (Articles 25 and 26).

Critically, the regulation establishes a strict "regulatory firewall" between research and commercialization. Under Article 20, sponsors and institutions are strictly prohibited from charging subjects any fees during the clinical research phase, ensuring that investigative trials remain non-commercial. However, Article 34 introduces a pivotal shift: once a technology receives translation approval, hospitals are permitted to charge for its clinical application. This creates a sanctioned, non-traditional path to revenue generation that bypasses the formal NMPA product registration process.

This pathway is particularly relevant for technologies that are inherently personalized or difficult to standardize as mass-produced pharmaceutical products, including autologous cell therapies, patient-specific gene editing treatments, and certain regenerative medicine applications.

Boundary with the NMPA Pathway

Order 818 explicitly preserves the traditional NMPA pathway. Article 55 states that clinical trials conducted for the purpose of developing drugs or medical devices shall continue to be governed by the Drug Administration Law and the Regulations on Supervision and Administration of Medical Devices. The NHC, together with the NMPA, will issue “Boundary Delineation Guidelines” to clarify which technologies fall under which pathway. This boundary will be a critical determinant for deal structuring.

PRACTICAL IMPLICATIONS FOR MNC DEALMAKERS

Reevaluating Milestone Triggers in Licensing Agreements

Standard licensing agreements typically tie significant milestone payments to regulatory milestones such as IND approval, NDA submission, and final NMPA marketing authorization. If a Chinese licensee chooses the Order 818 pathway, they may never trigger an NDA or NMPA approval, yet they could be generating substantial commercial revenue through hospital-based fee collection.

Dealmakers should consider revising milestone definitions to include “first commercial application” or “first fee-charging clinical translation” under the Order 818 framework. Royalty provisions should also be reexamined to ensure they capture revenue generated through hospital fee-charging mechanisms, which may differ structurally from traditional pharmaceutical product sales.

Navigating the Foreign Investment Negative List

China's 2024 Foreign Investment Negative List (Article 17) continues to prohibit foreign investment in the development and application of human stem cells and gene diagnosis and treatment technologies. While the State Council's pilot policy, effective September 2024, allows foreign-invested enterprises to engage in CGT development and application within the Beijing, Shanghai, Guangdong, and Hainan free trade zones, this relaxation is explicitly limited to activities intended for "product registration and production" under the NMPA route.

The critical question is whether foreign-invested enterprises (FIEs) can participate in the Order 818 technology translation pathway. Article 10 of Order 818 requires the clinical research sponsor to be a “legal entity lawfully established within the territory of China.” While an FIE technically meets this definition, the overarching Negative List prohibition creates substantial compliance risk. Until the authorities issue definitive guidance, MNCs should consider the following structural approaches:

MNCs may act as technology licensors, licensing their technology to a domestic Chinese entity (rather than an FIE) that serves as the clinical research sponsor and translation applicant. This structure avoids direct FIE involvement in the restricted activity while preserving economic returns through licensing fees and royalties.

Alternatively, MNCs may establish joint ventures with Chinese partners, where the Chinese partner holds majority control and serves as the regulatory-facing entity. This approach requires careful negotiation of governance rights, IP ownership, and profit-sharing mechanisms.

For MNCs that have already established FIEs in the designated free trade zones, they may pursue the NMPA product registration route while simultaneously monitoring whether the authorities will extend the pilot relaxation to cover the Order 818 pathway.

Human Genetic Resources (HGR) and Data Cross-Border Transfer

The Order 818 pathway relies heavily on hospital-enterprise collaboration, which inevitably involves the collection, use, and potential cross-border transfer of Chinese human genetic resources. Under the Regulations on the Administration of Human Genetic Resources (State Council Order No. 717), international collaborative research involving Chinese HGR requires prior approval from the Ministry of Science and Technology.

For MNCs involved in Order 818 collaborations, whether through data sharing, joint research, or technology support, the following compliance considerations are critical. Any arrangement that involves sharing Chinese patient-derived clinical data with overseas affiliates or partners will trigger HGR cross-border transfer requirements. Deal structures must clearly allocate responsibility for HGR compliance between the Chinese hospital, the domestic sponsor, and the MNC. The ownership of clinical data generated through the translation pathway must be explicitly defined in the collaboration agreement, as this data may have significant value for supporting global regulatory filings.

Technology Export Controls

When an MNC licenses technology out of China or acquires a Chinese biotech with the intent to develop the asset globally, China's technology export control regulations must be considered. The Catalogue of Technologies Prohibited and Restricted from Export includes certain biotechnologies, and the Biosecurity Law imposes additional restrictions on the transfer of biological resources and related data.

Dealmakers must conduct thorough due diligence to ensure that the specific technology being translated under Order 818 can be legally exported or licensed for global development. This is particularly important for technologies involving novel gene editing tools, proprietary cell processing methods, or unique vector designs that may fall within the scope of restricted technologies.

POLICY CONTEXT: WHAT THE CHINESE GOVERNMENT WANTS TO ACHIEVE

Understanding the policy objectives behind Order 818 is essential for MNCs seeking to align their strategies with the regulatory direction.

The primary driver is patient access. China faces significant unmet clinical needs, particularly in rare diseases and advanced-stage cancers. The traditional NMPA registration pathway is too slow for technologies that are inherently personalized and difficult to standardize. Order 818 is designed to allow these technologies to reach patients years earlier than would otherwise be possible.

The second objective is retaining innovation value domestically. In recent years, a growing number of high-profile Chinese CGT innovations have been licensed out to overseas companies for development, in part because China lacked a viable domestic commercialization pathway for these technologies. Order 818 creates a "land domestically first" option, reducing the pressure for Chinese innovators to license out prematurely.

The third objective is establishing regulatory sovereignty. Japan’s SAKIGAKE designation and conditional approval system for regenerative medicine and South Korea’s advanced regenerative medicine framework have demonstrated that alternative regulatory pathways can accelerate innovation. Order 818 positions China as a peer in this global regulatory evolution.

For MNCs, the strategic implication is clear: the Chinese government wants to see more biomedical innovation commercialized within China, and it is creating regulatory infrastructure to make this happen. MNCs that can position themselves as partners in this process, rather than purely as technology extractors, will be better positioned for long-term success in the Chinese market.

STRATEGIC RECOMMENDATIONS

MNCs engaging with the Chinese CGT sector should take the following proactive steps:

• Audit existing agreements: Review current licensing agreements with Chinese partners to identify vulnerabilities related to milestone definitions, commercialization pathway assumptions, and royalty calculation mechanisms. Specifically, ensure “commercial launch” definitions are not restricted to NMPA drug approvals (e.g., NDAs or biologics license applications) but encompass clinical application and revenue generation under the “medical technology” pathway. Pay particular attention to agreements where the licensed technology could plausibly be classified as a “biomedical new technology” under Order 818.
• Structure for dual-pathway flexibility: Future term sheets should explicitly address both the NMPA product registration pathway and the Order 818 technology translation pathway, ensuring economic alignment regardless of the route chosen by the licensee. Consider including "pathway election" provisions that require the licensee to notify the licensor before choosing a commercialization pathway. Furthermore, the agreement must explicitly define data sharing and ownership rights under each route.
• Leverage pilot zones strategically: For direct investment or joint ventures, consider locating operations within the designated free trade zones (Beijing, Shanghai, Guangdong, and Hainan) to access the pilot relaxation of foreign investment restrictions. However, remain mindful that the current relaxation is limited to the NMPA product registration route.
• Build HGR compliance infrastructure: Establish robust internal review mechanisms for any collaboration that involves Chinese human genetic resources. Ensure that data management protocols are designed to comply with HGR regulations from the outset, rather than retrofitting compliance after the collaboration is underway.
• Conduct export control diligence early: Before acquiring or licensing Chinese CGT assets, conduct thorough due diligence on whether the underlying technology falls within the scope of China's technology export restrictions. This analysis should be completed before commercial terms are finalized, as export control limitations may fundamentally affect the value proposition of the transaction.
• Consider the “acqui-hire” model: Rather than licensing individual assets, MNCs may consider acquiring Chinese biotech companies that have successfully translated technologies under Order 818, thereby gaining access to proven clinical data, established hospital relationships, and a validated technology platform. However, such acquisitions must account for the shift from a domestic to an FIE status, which may trigger rigorous National Security Reviews and Foreign Investment Access audits, particularly as CGT remains a sensitive sector. Importantly, any change in corporate control necessitates a complex HGR “Change of Entity” filing; because the entity will now be classified as a “Foreign Party” under HGR regulations, the acquired company may lose the right to collect new HGR materials or may face prolonged data export security assessments. MNCs should include “regulatory contingency” clauses in term sheets to address the risk of being barred from the very HGR datasets that justified the acquisition.

CONCLUSION

Order 818 represents a paradigm shift in how advanced therapies will reach patients in China. While the regulation is primarily designed to benefit domestic innovation, it creates meaningful indirect opportunities for MNCs, whether as technology licensors, data collaboration partners, strategic investors, or acquirers of validated Chinese CGT assets.

The key for MNCs is to move beyond viewing Order 818 as merely a Chinese domestic regulatory development. Instead, it should be understood as a structural change that will reshape the competitive landscape, alter deal economics, and create new pathways for cross-border value creation in the global CGT sector.

We are available to assist clients in evaluating the impact of Order 818 on their existing agreements, structuring new cross-border transactions, and navigating the complex intersection of foreign investment restrictions, HGR compliance, and technology export controls in the Chinese life sciences sector.