Under the Shadow of the Biosafety Bill, Chinese Pharmaceutical Companies Face Risks for 120 Drugs, Overseas Business May Suffer Heavy Blow!

Although the US Biosafety Act has not yet officially come into effect, its potential impact on domestic pharmaceutical companies is still significant, like a pending sword.

According to the British "Financial Times" recently reported that because of the Biosafety Act "as a potential threat to US national security, two well-known" pharmaceutical "companies are considering adjusting their business layout to deal with potential risks. Specifically, Wuxi Apptec is considering the sale of its Advanced Therapies Manufacturing unit (ATU), which focuses on cell and gene therapies, at its four sites in Philadelphia, while Wuxi has also hired professional advisers to assess potential buyer interest in parts of its European production sites, particularly the two German manufacturing plants it acquired and expanded from Bayer AG. Management has expressed concern that these facilities may no longer meet the Company's future strategic development needs.

The U.S. House of Representatives voted on the BioSecurity Act (H.R.8333) on September 9 local time, and passed the bill by 306 votes in favor and 81 votes against. The bill limits the federal government's business with some biotech providers on the grounds of "national security," and specifically names five Chinese biotech companies as "subjects of interest," including Wuxi Apptec, Wuxi Biotech, BADA Group, BADA Intelligence and its subsidiary Complete Genomics.

In response to this situation, Wuxi AppTec issued a statement on September 10, strongly opposed this non-due process and unreasonable default designation. The company maintains that it has not, does not, and will not pose a national security risk to the United States or any other country, and that it has not been sanctioned by any U.S. government agency.

The storm, which began in January 2024, is expected to continue in the coming months. According to the US legislative process, the bill still needs to be voted on by the Senate, and the version passed by the two chambers needs to be reconciled before it is finally submitted to the US President to sign into law. Before then, the bill still needs to be approved by the Senate, where the legislative process is unclear.

It is worth noting that in the version passed by the House of Representatives, the named companies actually enjoy a certain buffer period to continue to perform contracts funded by the U.S. government for customers until 2032.

Affected by this, the share price of the named "pharmaceutical" company suffered a heavy fall on September 10. Wuxi AppTec's A-shares and Hong Kong shares closed down 5.38 per cent and 10.43 per cent, respectively, while Wuxi Biotech's Hong Kong shares fell 3.88 per cent. In addition, BGI and BGI also closed down 2.73 percent and 1.5 percent, respectively.

On the morning of October 8, WuXi AppTec issued a voluntary announcement to respond to the rumor of the sale of WuXi ATU business. The company said it is currently actively evaluating options to ensure the continued operation of the WuXi ATU business, and stressed that no final decisions have been made regarding the sale of the business. At the same time, a company spokesperson said that it will evaluate options to continue operating ATU based on priorities to safeguard the needs of employees and patients in urgent need of time-critical, life-saving treatments.

On the other hand, last month the US House of Representatives overwhelmingly passed the BioSecurity Act, which is now awaiting further consideration in the Senate. If the bill eventually becomes law, it is expected to have a profound impact on the biopharmaceutical industry, especially for those companies that are highly dependent on third-party service providers in China. According to GlobalData, the legislation could affect the development of more than 120 U.S. drugs that work with companies mentioned in the BIOSECURE Act, half of which are in clinical trials and a third are in early preclinical research and discovery.

From the financial report data over the years, the domestic leading CXO companies such as Wuxi Apptec, Pharmaron, Kelaeeng, etc., their overseas market revenue accounted for more than 70%, and the scope of overseas market expansion has gradually expanded from the United States to Europe, Southeast Asia and other regions. In response to potential market changes, these companies are actively accelerating the pace of overseas layout. For example, Wuxi Apptech has built a R & D and production base in Singapore, Kellein has completed the layout of a European R & D and production base, Botten Shares in Slovenia has also been put into operation, and Kyushu Pharmaceutical has set up wholly-owned subsidiaries in Japan and Germany to build CRO service platforms. Chen Zhisheng, CEO of Wuxi Biologics, previously said that Wuxi Biologics' business in Europe has grown significantly, from the initial market share of less than 5% to 30%, with Switzerland, Germany and the United Kingdom as the main market sources, and the business scale of individual countries has approached the level of the Chinese market.