BIOSECURE Act continues to loom over Chinese pharma manufacturers

With the US BIOSECURE Act on its way to passing into legislation, Chinese companies are facing declining revenues within the first half of 2024 as US pharmaceutical and healthcare companies pull their businesses from the country. 

In May 2024, the US House Committee on Oversight and Accountability overwhelmingly voted to approve the act, which passed approval to the full House and Senate, where it received a 40-1 and 11-1 approval vote respectively. While the bill has yet to be signed in by President Joe Biden (delays from disagreement around its inclusion in the 2025 National Defense Authorisation Act have stalled its legislative progression) it has already caused serious implications for Chinese manufacturing companies and their US customers. Revenue for WuXi AppTec, a leading manufacturer in China, fell by 9% - in particular, the company’s US revenue fell by 1% while European revenue rose by 5%. The act also threatens the likes of BGI, MGI, and Complete Genomics. 

Described as protecting US national security and financial interests, the act is intended to prevent the access of US funds to Chinese biotechs and manufacturers deemed as ‘companies of concern’. With the US pharmaceutical and biotechnology industry’s reliance on contract manufacturers, the act has prompted concern over its impact on innovation, R&D, and manufacturing for large swathes of medicinal products. 

A survey conducted by L.E.K. Consulting demonstrated a sharp decrease in the confidence of many US companies for their Chinese partners – while only 2% have begun the actual process of removing their businesses from China, 26% of companies surveyed are already looking to shift away. However, 11% stated the act currently has no impact on their business decisions, a fact attributed to the uncertainty and fuzzy nature of the bill. In an earnings presentation earlier this week, WuXi stated that the bill “involves uncertainty and multiple steps remain in the legislative process before such proposed legislation is enacted into law.” 

Though US pharmaceutical and biotechnology companies are not in total agreement regarding how the act affects their business practices, politicians are a different story. The act received widespread bipartisan support in the Senate and House – the main roadblock is whether the bill will stand on its own or be part of a wider national defense policy.  

WuXi addressed their stakeholders, stating they were “actively working together with its advisors to set the record straight and advocate for appropriate changes to the proposed legislation...The Company strongly disagrees with any preemptive and unfair designation of us as a named ‘biotechnology company of concern’ without due process. The Company fully complies with the laws and regulations in the countries and regions in which we operate.” Even so, up to 68% of respondents to L.E.K. Consulting’s survey stated they were in the process of adjusting operations with Chinese partners, including increased legal and compliance requirements, as well as diversifying their supply chain partnerships. 

Sources: 

[1] With BIOSECURE Act looming, WuXi AppTec shows declining revenue [Accessed July 31, 2024] https://www.fiercepharma.com/manufacturing/bioseecure-act-looming-wuxi-apptec-shows-declining-revenue  

[2] BIOSECURE Act hurts US biopharma industry’s confidence in Chinese partners: survey [Accessed July 31, 2024] https://www.fiercepharma.com/pharma/biosecure-act-hurts-life-sciences-companies-confidence-chinese-partners-survey