2024-03-15| China

Major U.S. Organization BIO Severs Ties With Member WuXi AppTec Amid U.S. Government’s Security Concerns

by Bernice Lottering
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In a drastic turn of events, the U.S. Biotechnology Innovation Organization (BIO) and its member, WuXi AppTec, have served ties. This move comes amidst the advancement of two bills aimed at Chinese biotech companies in the U.S. Congress. The major biotech trade organization emphasized its commitment to working with U.S. policy makers and endorsed its support of the BIOSECURE Act, while its member, leading CDMO Wuxi AppTec, reiterated that it does not pose a security threat and current allegations are misleading. Previous strains on the political relationship between the two superpowers of the US and China have resulted in a spill over into the biotech industries, likely due to the upcoming elections.

Biotech Security Concerns Agitate U.S.-China Relations

The strained relationship between these two global powerhouses is vividly evident in this scenario. As BIO dissolved relations with member WuXi AppTec, the politics of the situation definitely did not go unnoticed. WuXi AppTec, an integral supplier of essential ingredients to several of the globe’s leading 20 pharmaceutical firms, is one of the largest contract development and manufacturing organizations (CDMO) in China, with operations across Asia, Europe, and North America. It operates independently from, but is affiliated with WuXi Biologics. Conversely, BIO represents one of the largest industry organizations within the U.S., boasting a multitude of influential members, including Eli Lilly, Merck, Johnson & Johnson, and numerous others as one of the largest biotechnology organizations.

On Wednesday, BIO announced its decision to sever ties with WuXi AppTec. as part of an effort to bolster national security measures. This decision follows the outcome of a vote earlier in March by the U.S. Senate’s Homeland Security Committee, which approved a bill aimed at potentially restricting business dealings with Chinese biotech firms like BGI and WuXi AppTec. Fundamentally, the proposed legislation of the BIOSECURE Act seeks to safeguard the personal health and genetic data of Americans from foreign adversaries. This is a bold move for the U.S. biotechnology sector, which will need to adapt in the absence of a company on which it heavily relied for drug development and manufacturing.

Severe Implications See Wuxi in the Red

This resolute step has sparked significant worry among investors, resulting in major sell-offs of Wuxi AppTec shares, as observed through a significant decline in the stock value of WuXi AppTec. Since last month, when Chinese markets caught wind of this potential development, WuXi AppTec has experienced a decrease of over 6%, with a persistent downward trend. On Thursday, Wuxi AppTec’s Hong Kong listings were 13% lower, while its Shanghai listings dropped by 8%. WuXi Biologics fell 14% and WuXi XDC, the contract medical research unit of WuXi Biologics, declined by a staggering 16%.

Wuxi Claims Initiative in Ties Severance

Despite growing concerns of investors amidst the increasing pressure that the company shares face, WuXi AppTec has responded to these developments by stating that it left the Washington-based organization voluntarily. In an updated statement, WuXi AppTec declared that it intentionally elected to sever ties with BIO, stating that U.S. legislations were “maligning” its membership within the high-profile association given that the bill “relies on misleading allegations and inaccurate assertions.” In a letter addressed to the president and CEO of the Biotechnology Innovation Organization, John Crowley, dated March 12, the company declared that it would terminate its associate membership in BIO, effective immediately. This correspondence, seen by The Wall Street Journal on Friday, outlined the decision made by WuXi AppTec and its subsidiaries.

Furthermore, WuXi AppTec has reaffirmed its stance, stressing that it does not pose a security threat to any nation. This statement amidst the growing tensions between the U.S and China, seems to fall short of ameliorating the apprehension that the political landscape puts forward. However, despite efforts such as proposed share buybacks, the challenges facing WuXi AppTec and its affiliates persist, necessitating strategic responses to navigate the evolving landscape.

Amidst the ongoing tensions between the U.S. and China, the actions of key players like BIO in the U.S. and WuXi AppTec, headquartered in China, may provide a deeper insight into the sensitive political landscape. As uncertainties surrounding regulatory changes and geopolitical tensions weigh heavily on investor sentiment and industry dynamics, the market remains on edge, speculating where the next soothing salve or searing setback will emerge. 

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