Editor's (re)view: BIOSECURE Act hits legislative roadblock with passage in question
With Congress just days from its holiday recess, time is running out for lawmakers to pass the BIOSECURE Act. The proposed legislation, which seeks to prevent federally funded U.S. pharma companies from working with certain Chinese services firms, was excluded from a key defense bill last weekend with passage before the end of the congressional session now in question.
Five Chinese biotechs are named in the House version of the BIOSECURE Act as “companies of concern” that are potential risks to U.S. national security: BGI (formerly known as the Beijing Genomics Institute), Complete Genomics, MGI, WuXi AppTec, and WuXi Biologics. The Senate version does not name WuXi Biologics.
Shares of WuXi AppTec and WuXi Biologics were boosted this week on news of the legislation’s omission from the Fiscal Year 2025 National Defense Authorization Act (NDAA). However, the financial stakes are high not just for the Chinese services firms.
The BIOSECURE Act could impact over 120 U.S. biopharma drugs, according to GlobalData, which found that more than 45 U.S.-headquartered companies have entered into contract service agreements, licensing deals, or partnerships with the Chinese firms and their subsidiaries.
In May, lawmakers updated the proposed legislation with a grandfather clause that would allow existing contracts with the five Chinese services firms to be maintained until 2032, providing some leeway for U.S. companies to make other business arrangements. In September, the House overwhelmingly passed its bill in a bipartisan vote of 306 to 81.
While the fate of the BIOSECURE Act remains in limbo, law firm Foley & Lardner — which advises the life sciences industry — has recommended that pharma and biotechnology companies that receive federal funding or contract with federal agencies should be prepared to wind down business ties with these Chinese firms.
Which CDMOs stand to benefit?
As a provider of contract development and manufacturing (CDMO) services to many American biopharma companies, WuXi AppTec and U.S.-based industry have much to lose if the bill finally becomes law.
“BIOSECURE would effectively ban Wuxi from conducting business in the United States, and if passed, risks causing delays, shortages, and cost increases as companies seek to transition to other CDMOs,” according to Foley & Lardner, which contends “it will likely take years for competitors to replace the lost CDMO capacity.”
William Blair analyst Max Smock sees Swiss-based Lonza as being the best positioned to benefit from the BIOSECURE Act, given that the CDMO’s offerings overlap large segments of both WuXi AppTec and WuXi Biologics. Smock estimates that about $2.9 billion of revenue recognized by the two Chinese biotechs in 2023 was tied to selling products and services to U.S.-based customers that could be replaced by Lonza.
On Thursday, Lonza announced it is restructuring with the goal of becoming a “pure-play” CDMO for the biopharma industry. In its presentation to investors, the company touted the fact that it has the largest U.S.-based mammalian capacity, thanks to its acquisition of Genentech’s Vacaville, California manufacturing facility from Roche for $1.2 billion earlier this year.
While it remains unclear if the BIOSECURE Act will be passed into law, and what the final version might look like, Lonza and other non-China-based CDMOs — including U.S.-based Avid Bioservices — are poised to potentially benefit.
Indian CDMOs including Aurobindo, Cipla, and Syngene “may be well-positioned for increased growth due to their cost-effectiveness and highly skilled workforce,” GlobalData analyst Alison Labya said in a statement. At the same time, she noted that “growing concerns of U.S. dependency on offshore suppliers may also result in a shift towards U.S. companies selecting domestic CDMOs.”
Where to from here?
Gil Roth, president of the Pharma & Biopharma Outsourcing Association (PBOA), this week told Pharma Manufacturing that there’s a chance the BIOSECURE Act could pass this year by being added to a continuing resolution in the final days of the 2024 congressional session.
“It’s tough to talk about BIOSECURE because at the very moment it is not part of the National Defense Authorization Act,” said Roth, who heads the CDMO advocacy group. However, the legislation “could be added to the continuing resolution for year’s end, in which case it becomes active again.”
Even if it’s not passed in this legislative session, there’s reason to believe that — given the escalating geopolitical tensions between the U.S. and Chinese governments and the anti-China sentiment of the incoming Trump administration and Republican-controlled House and Senate — the BIOSECURE Act could secure passage in the next Congress.
However, Roth contends that “because of different committee leadership, it could be more difficult to move BIOSECURE in its current form.”
Case in point: in the next Congress, libertarian-leaning Sen. Rand Paul (R-Ky.) will chair the Senate Homeland Security and Government Affairs Committee, where in March as ranking member he cast the only vote against the BIOSECURE Act — which passed the committee. In addition, some House Democrats have voiced concerns that by specifically naming certain companies, the legislation violates due process. Reps. Jim McGovern (D-Mass.) and Jamie Raskin (D-Md.) reportedly opposed the bill’s inclusion in the NDAA.
In the end, PBOA is “neither for nor against” the BIOSECURE Act, Roth said, while noting that WuXi AppTec and WuXi Biologics are not members of his CDMO trade group. “We are simply helping Congress understand the potential ramifications of this bill on the pharma R&D and manufacturing infrastructure.”
Perhaps in a sign that WuXi Biologics believes the legislative threat is behind it. The company this week reportedly resumed construction of a $300 million manufacturing facility at The Reactory biotech park in Worcester, Massachusetts, as the BIOSECURE Act stalled in Congress.
