U.S. Biotech Is In For A Protracted Divorce From China

By Matthew Pillar, Editor, Bioprocess Online

Seems like just yesterday that the U.S./China squabble was highlighted by high-flying spy balloons and TikTok. Now, lawmakers on Capitol Hill are proposing legislation that would put access to Chinese biopharma, one of the largest and fastest-growing sources of biopharmaceutical raw materials and manufacturing capacity in the world, largely off-limits.

Led by Representatives Mike Gallagher (R) and Raja Krishnamoorthi (D), the  U.S. House Select Committee on China’s proposed “Biosecure Act” would prohibit federally funded institutions from doing business with biotechs that are labeled “of concern” in foreign adversary nations.

Among hundreds of other Chinese firms threatened by the act is WuXi AppTec, one of the world’s largest CDMOs, whose ability to serve U.S. biopharmaceutical companies—likely its largest customer demographic—is at serious risk. Conversely, the House Select Committee says WuXi AppTec is the risk. The Committee contends that the $6 billion dollar supplier is supported in part by PLA (People’s Liberation Army) funds and deemed it further threatening that WuXi Biologics CEO Chen Zhisheng is a visiting professor at China's Academy of Military Medical Sciences. The U.S. Commerce Department added that institution to an export control list in 2021.

At the center of the Committee’s concerns, according to Krishnamoorthi, is ensuring our genomic data is kept safe and secure. Important as that is, the language in its proposed act suggests far more sweeping disruption to our relationship with Chinese pharmaceutical suppliers.

The moves prompted WuXi to respond by way of its home page (www.wuxiapptec.com), which now greets visitors with a letter from company leaders Ge Li, Ph.D., Minzhang Chen, Ph.D., and Steve Yang, Ph.D. doing their best to reassure customers that WuXi poses no national security risk to any state.

WuXi isn’t the only Chinese biopharmaceutical company in the Committee’s sights. Chinese genetic research juggernaut BGI Group was also singled out, primarily over fears that it’s sharing genetic data, generated as a course of doing business, with the PLA. The Committee also accuses BGI of links to human rights abuses in Xinjiang.

Those are serious allegations, but by the sweeping standard the Committee applies in the language of its proposed legislation, it appears it won’t take such egregious offenses as contributing to genocide or sharing secrets with the Chinese communist party to land Chinese biotechs on the U.S. blacklist.

The proposed act would effectively cut off federal funding and contract opportunities to any U.S. biotech contracting “equipment designed for the research, development, production, or analysis of biological materials as well as any software, firmware, or other digital components” from Chinese “companies of concern.” That includes advising or consulting services.

Who Do Sanctions Really Put At Risk?

The risk to Chinese biopharmaceutical firms is obvious and felt, measured by significant hits to Chinese biotech stocks in the days since the proposed Act became public news. But China’s massive bio economy isn’t the only potential victim.

There’s a high likelihood that at some point in your career – during your academic years, a fellowship, or a residency, perhaps – the work you did was funded, at least in part, by the U.S. government. As was the institution at which you did that work. When your career began, perhaps you worked on NIH- or DoD-funded research. During the pandemic, maybe the company you now lead, or work for, was the beneficiary of federal emergency operating or research funding. Perhaps the U.S. government was even the largest, or sole, buyer of your products. Many of you launched or work for companies that were, or remain, supported in part by a federal grant or other funding mechanism. And there’s a high likelihood that in any or all of that, you were (or are) doing business with Chinese suppliers. That reality is numbers-backed. According to Nikkei China, the U.S. imported $6.95 billion worth of pharmaceuticals from China in 2022 alone.

We’re Not Ready To Fly Solo

Among myriad lessons learned by U.S. biotech during the COVID 19 pandemic were many related to biopharmaceutical supply chain security. The words “redundancy” and “nearshoring” made their way into strategic supply chain plans untold. The federal government has rallied in favor, trotting out President Biden’s National Biotechnology and Biomanufacturing Initiative (pledging $2 billion across all biomanufacturing development, including ag, forestry, and fabrication) and, more recently, the CHIPS and Science Act. Those plans include a DHHS commitment to put $40 million into expanding state-side biomanufacturing for APIs, antibiotics and other medications, the DoD’s $270 million Tri-Service Biotechnology for a Resilient Supply Chain program, and more.

That’s all good, and important, and pushing U.S. biotech in the right direction. But it’s not enough money and there’s not enough time. That aforementioned $6.95 billion in Chinese pharmaceuticals imports was 8x the amount we imported in 2021. Contrast these numbers to those the U.S. has committed to biomanufacturing self-sufficiency. It doesn’t add up.

Congress, in its earnest endeavor to release our dependence on China on so many fronts, is pushing U.S. biotech ahead of its skis. Rep. Gallagher himself acknowledges that our biologic supply chain is “entirely dependent on China.” Surely, he and his colleagues on the Committee must also admit that we’re several years, several billion dollars, and several thousand skilled workers away from changing that reality. It’s incredibly premature to close ourselves off to one of the world’s largest and fastest-growing sources of biopharma manufacturing capacity and supply.

Posturing unrealistic threats of a rip-and-replace, without a replacement in sight, is riskier than sharing the sandbox with some kids we have good reason to dislike. In fact, it puts the very U.S. biotech development progress we seek, not to mention public health, at risk. Rushed into action and void of the protective nuance deserved of any business transaction, the Biosecure Act would even jeopardize the biologics development efforts of the very government that authored it. Is Congress willing to cut off its nose to spite its face?

Who Loses (Besides Chinese Biotech)? Who Wins?

Who stands to lose if the proposed legislation becomes law? In one example of many, would Iovance, for instance, which just won FDA approval of an important cell therapy for the treatment of Melanoma, lose? Congress’ colleagues down the street at the FDA just approved a WuXi site in Philadelphia to begin the analytical testing and manufacturing of that therapy. What should become of that, and the dozens of other development and manufacturing projects U.S. biopharmas are engaged in with Chinese CDMOs? What of the hundreds more raw materials and equipment sourcing deals U.S. biotechs rely on?

Getting biomanufacturing capacity that’s equivalent to that which is currently outsourced to Chinese firms online—and on U.S. soil—would require billions in federal funding. Where that money would come from is unclear, but the proposed Act, in its effort to prevent U.S. taxpayer funds from being provided to “foreign adversary” biotechnology companies, would surely impact U.S. taxpayers in a felt way. It would also no doubt create an economic boon, which would create winners out of the companies and people who build biomanufacturing plants, who work in them, and who sell biomanufacturing equipment to them.

The bad news is that replacing China’s materials and manufacturing capacity would cost more money than those aforementioned acts have earmarked for the task, and it would take many years to achieve. We’re simply not ready for such sweeping cuts to our ties with Chinese biopharma.

For more opinion and analysis on the proposed Biosecurity Act, read Louis Garguilo’s take on Outsourced Pharma here.