After the holiday, the stock prices of WuXi AppTec and WuXi AppTec have just had a period of "good days", and the previously plummeting stock prices are slowly being repaired. On Monday of this week, WuXi AppTec and WuXi AppTec's stock prices also saw a sharp rise, but the good times were not long, and this time they were "disrupted" again.
At around 10pm Beijing time on the 6th, the Homeland Security Committee of the United States Senate held a proposal hearing. The Senate version of the Biosecurity Act (S.3558) was passed by 11-1 votes at the meeting. The next step is that the committee is expected to first carry out internal bill sorting/revision work, and then send the Biosecurity Act (S.3558) to the Senate for a full review and voting session, But the time for Senate deliberation has not yet been announced.
A Caixin reporter noticed that according to authoritative US websites, the probability of the bill being passed and promulgated has increased from 18% previously shown to 23% at the current stage. Industry experts told Caixin that it is not surprising that the US Senate version of the Biosecurity Act was passed during the hearing of the Homeland Security Committee. When the bill enters the Senate review and voting stage, there may be modifications and adjustments. In addition, it is worth paying attention to when the stock price of Pharmaceuticals will desensitize the progress of the bill. However, at this stage, pharmaceutical companies and Chinese biopharmaceutical companies should consider more "bottom line thinking" and "backup solutions".
The Biosafety Act (S.3558) was passed at the hearing with a significant vote difference of 11-1
At 10:30 pm Beijing time on March 6th, the previously announced hearing on the proposal by the US Senate Homeland Security Committee was held as scheduled. During the hearing, more than 20 proposals were reviewed, including the US Senate version of the Biosafety Act (S.3558), which has attracted much attention from the Chinese biopharmaceutical industry.
According to Reuters, the Biosafety Act (S.3558) was proposed by US Democratic Senator Gary Peters, and its core content aims to prohibit US federal agencies from signing contracts with Chinese biotech companies such as Huada, Pharmaceuticals, and others of concern. It also hopes to prohibit the government from entering into contracts with companies that use the aforementioned company's equipment or services.
At the aforementioned hearing, the Biosafety Act (S.3558) was passed with 11 votes in favor and 1 vote against, and the co initiators of the bill, members of parliament, participated in the hearing.
This also means that the Biosafety Act (S.3558) has officially passed its second reading and is about to enter the Senate for its third reading.
According to the authoritative US law disclosure website GovTrack, the probability of the bill being passed has increased from 18% previously shown to 23% at the current stage.
Along with the Biosafety Act (S.3558), there was also a Biosafety Act (H.R.7085) proposed by Representative and Chairman of the US China Strategic Competition Committee, Mike Gallagher, in the US House of Representatives. The previous proposal of this bill caused a sharp decline in the domestic pharmaceutical and CRO sectors.
According to Caixin News, there are two possible explanations for the subsequent progress of the bill. Firstly, according to the legislative procedures of both houses of the United States, bills are usually proposed simultaneously. If the Biosafety Act is passed by a unanimous vote, it will be directly submitted to the President for signature and officially take effect after being signed by the President. If the versions of the Biosafety Act passed in both houses are different, both houses will establish a consultative committee to resolve the differences.
Secondly, according to the authoritative US bill disclosure website GovTrack, the Biosafety Act (S.3558) will be sent to the House of Representatives for review after being passed by the Senate, and will be reviewed by the corresponding committees of the House of Representatives. The committee may make modifications to the proposal and submit it to the entire House of Representatives for vote. If the vote is passed, it will be submitted to the President of the United States. The President may choose to sign the proposal.
Especially, according to reports, Biden signed an executive order last Wednesday to "prevent the large-scale transfer of personal data of Americans to countries of concern," including genome, biometric, geolocation, and financial data. This administrative order may limit the activities of genomics companies in the United States, rather than contract research institutions like the Pharmaceuticals Department. The industry believes that this move will alleviate the pressure on congressional Democrats to support CRO bills targeting Chinese companies such as WuXi AppTec and WuXi Biotech.
The US House of Representatives is the real game field, and the industry believes that there is a high probability that there will be modifications
"We are not surprised at all that the bill was passed in the Senate hearing," Lai Chuanliang, senior partner and fund manager of Shenzhen Qianhai Ruifeng Capital Management Co., Ltd., explained to Caixin News Agency reporters, because members of the US Senate Homeland Security Committee belong to the "hawks" among the "hawks".
On the official website of the US Senate, a Caixin reporter noticed that the only dissenting vote during the hearing was cast by Republican Senator Rand Paul from Kentucky.
Rand Paul stated at the aforementioned hearing his only reason for casting a dissenting vote: "I am also concerned that the banned company here actually has many different applications throughout the entire supply chain, and we have not conducted sufficient research to understand the consequences of banning this behavior." He is concerned that this will ultimately be attracted to protectionism and lead to an increase in consumer prices in the United States.
Lai Chuanliang also pointed out that rational opponents represented by Rand Paul may emerge one after another in the subsequent Senate and House of Representatives deliberation processes, because decoupling in the CRO field is not in the interests of the US biopharmaceutical industry, and the rational voice representing the industry may be heard in the subsequent US Senate and House of Representatives.
"So, personally, I think it is highly likely that the Biosafety Act will be amended, and the final version may not be the current version," Lai Chuanliang further predicted.
It is reported that WuXi AppTec operates in six states in the United States, including Pennsylvania, California, and Delaware, and its subsidiaries are investing approximately $500 million to build manufacturing factories. An investor stated that in the first nine months of 2023, two-thirds of its revenue came from the US market, and the company also had branches in Europe and China, providing extensive services to the pharmaceutical and healthcare industries.
Apart from two separate proposals being pushed forward in both houses of Congress, there are other actions taken by US congressmen. On February 12th, a bipartisan group of U.S. lawmakers wrote letters to Treasury Secretary Janet Yellen, Defense Secretary Lloyd Austin, and Commerce Secretary Gina Raymondo, stating that drug use poses a threat to U.S. national security.
"WuXi AppTec has not posed a national security risk to the United States in the past, present, and future, and even if the US government conducts another review of the company, it will reach the same conclusion." After the January 26 controversy, WuXi AppTec has issued several public announcements emphasizing the above statements, but has not had any impact on the positive attitude of US lawmakers.
According to the Caixin News Agency, after Mike Gallagher proposed the Biosafety Act (H.R.7085) on January 26th, as the situation and stock price escalated, WuXi AppTec issued over 10 public announcements, including several targeted clarification announcements and disclosure of the progress of share repurchases.
"Through the series of controversies surrounding the Biosafety Act, it can be seen that it is like a hanging stick, occasionally used to intimidate some of our biopharmaceutical companies. Relevant industries and enterprises should consider 'bottom line thinking' and prepare 'backup plans' at this stage to prevent the worst-case scenario." Lai Chuanliang suggested in the end.