Recently, the U.S. Senate and House of Representatives have successively launched proposals against Chinese biotechnology companies such as WuXi AppTec and BGI, restricting the development of related companies' business in the United States on the grounds of leaking U.S. genetic data. The bill, previously sponsored by Gary Peters, chairman of the U.S. Senate Committee on Homeland Security and Affairs, prohibits U.S. federal agencies from contracting with BGI, MGI, MGI's U.S. subsidiary Complete Genomics, WuXi AppTec and its subsidiaries, and other related biotechnology companies to purchase or obtain any biotechnology equipment or services manufactured or provided by the biotechnology companies. The bill was originally expected to be considered before a Senate committee on January 31, but it did not go ahead as scheduled, giving companies involved in this period of market pressure a little breathing room.
Initiated by U.S. senators
Proposal for Chinese biotech companies
The bill introduced by U.S. Senator Gary Peters.
On February 4, Reuters and others** reported that the proposal initiated by U.S. senators against Chinese biotech companies such as WuXi AppTec and BGI was postponed in the Senate. The bill is the "Bill Prohibiting Contracts with Certain Biotech Providers and Using Them for Other Purposes", which was initiated by Democratic Senator Gary Peters on December 20, 2023. WuXi AppTec and its subsidiaries and other related biotech companies have contracted to procure or acquire any biotechnology equipment or services manufactured or provided by the biotech companies, and prohibiting contracts with companies that use their equipment or services, as well as prohibiting loan and grant funding.
The bill enumerates the grounds on which these companies pose a risk to the United States: conducting joint research with, supporting, or belonging to foreign adversary's military, domestic security forces, or intelligence agencies; Provision of multi-omics data obtained through biotechnology equipment or services to foreign adversaries**; or obtaining human multiomics data through biotechnology devices or services without explicit and informed consent.
The Senate was originally expected to hold a committee meeting on January 31, 2024, to consider the bill, which has now been postponed. The Senate Committee on Homeland Security and ** Affairs, chaired by Senator Peters, has not set a new date for its consideration of the bill, which is not expected to be introduced in the committee for at least a few weeks. Senate aides said that despite expectations, the bill has not made progress in the committee and will be reconsidered in the future.
Gary Peters is his own business
Gary Peters.
While it can take a long time from the time it takes to get it through and when it is legislated, and there may be many uncertainties along the way, Gary Peters' own experience adds to the risk that the proposal will be passed. During the last term (117 sessions), 19 of the 58 bills of which Gary was the lead sponsor were signed into law, the most bills passed by a U.S. senator in a single Congress in more than 40 years. In the U.S. Senate, Gary is considered one of the most effective bipartisan senators, according to the Nonpartisan Center for Effective Legislation (University of Virginia and Vanderbilt University) and the Lugar Center (Georgetown University). In this regard, China needs to be more vigilant about the proposal initiated by Gary Peters.
In this Congress, Gary Peters has held a number of important positions. He currently serves as Chairman of the 118th Senate Committee on Homeland Security and Affairs, which oversees the Department of Homeland Security and is the Senate's Supreme Oversight Committee. He is also a member of the U.S. Senate Appropriations Committee, the Senate Armed Services Committee, and the Senate Committee on Business, Science, and Transportation. In addition, Peters is one of six congressional board members on the Smithsonian Institution's Board of Trustees, which governs the organization.
Gary is known for protecting Michigan's traditional industries and has experience in confronting China. He was first elected to the U.S. House of Representatives in 2008 and serves on the Financial Services Committee. During his first term, as one of the most junior members of the House of Representatives, Peters continued to be one of Michigan's voices as one of the most junior members of the House of Representatives, helping to draft and finalize the comprehensive Dodd-Frank Wall Street Reform and Consumer Protection**, whether it was advocating to save Michigan's auto and manufacturing industries or ensuring small businesses had the funding they needed to start, grow, and succeed in the wake of the Great Recession. In November 2017, in response to the trend of Chinese acquisitions of U.S. technology companies, Peters co-sponsored a bill to expand federal** ability to block foreign acquisitions of U.S. companies by strengthening the Committee on Foreign Investment in the United States (CFIUS). The scope of CFIUS's authority has been expanded to allow it to review smaller investments that may be rejected and to add additional factors for CFIUS to consider, including whether information about U.S. persons will be exposed as part of a transaction, or whether the transaction will facilitate fraud.
U.S. House of Representatives Biosecurity Act
Coincidentally, on January 25 this year, the U.S. House of Representatives introduced a similar Biosecurity Act. On the same day, Mike Gallagher (R-Wisconsin), chairman of the House Select Committee on Strategic Competition between the United States and the Chinese Communist Party, and senior Congressman Raja Krishnamoorthi (D-Illinois) led the introduction of the Biosecurity Act, which aims to ensure that foreign adversary biotech companies reduce the risk of threatening the U.S. and have no access to U.S. taxpayer funds. Once enacted, the legislation would restrict federally funded health care providers from using foreign rival biotech companies, including BGI and its subsidiaries MGI, Complete Genomics, and WuXi AppTec.
On the one hand, the U.S. House of Representatives accused the above-mentioned biotech companies of serving China. Gallagher said, "BGI collects genetic data from Americans and uses it for research with China, and China will use the genetic data collected by BGI to further malicious aggression and possibly even develop organisms targeting the American people."
On the other hand, the United States is more worried about the United States falling behind in the competition with China. "It is unacceptable for U.S. taxpayer money to be used to subsidize biotech companies of our foreign adversaries, and by allowing these companies to collect and analyze vast amounts of foreign genomic data, we run the risk that our most sensitive information will be used against us by foreign adversaries," Krishnamorthy said. Our legislation addresses this issue by establishing a regulatory framework to prevent taxpayer funds from flowing to relevant biotech entities. Closing this loophole is the first step in protecting the U.S. bioeconomy and ensuring that our genomic data is safe and secure. ”
The reaction and impact of the companies involved
The Chinese biotech companies most affected by the US Senate and House of Representatives proposals are WuXi AppTec and BGI, both of which have made many statements but with little success. In an official statement sent to the Global Times on January 31, BGI refuted false accusations in the Biosecurity Act filed by the United States, saying that "the allegation that BGI is involved in collecting, storing or analyzing personal genetic information for the purpose of human rights violations is false," denied the U.S. allegation that BGI is controlled by China** or the military, and said the bill would "limit competition in the important field of human genome sequencing." WuXi AppTec issued four clarifications on its official platform from January 26 to February 5 this year, saying that the company has no relationship with any ** or military organization, and refuted any claim that it poses a *** risk to any country.
WuXi AppTec's Hong Kong stock price on February 5.
The stock prices of the companies involved suffered badly as a result of the two proposals, until the news of the postponement of the bill's review eased somewhat. Taking WuXi AppTec as an example, as of February 3, WuXi AppTec's Hong Kong share price has reached 45%, and the Shanghai stock price has reached 31%. On February 2, WuXi AppTec announced the implementation of 1 billion yuan (1US$3.9 billion) domestic share repurchase program, with repurchases** not exceeding 100 per share90 RMB (14.)02 USD), with a maximum shareholding of 150%. According to the announcement, the repurchased shares will be cancelled and the registered capital will be reduced. However, the plan failed to stop the WuXi AppTec share price**. On 2 February, the company's share price in Shanghai fell by 10%, compared to 21% in Hong Kong. After the news that the bill was not reviewed as scheduled, on February 5, WuXi AppTec's A-shares and Hong Kong stocks went diametrically opposed, with A-shares closing down 396%, while Hong Kong stocks rose by 4%**.
In the medium to long term, whether the bill is passed or not, it will be a sword hanging over the heads of Chinese biotech companies such as WuXi AppTec, putting them under pressure for a long time. In the first half of 2023, WuXi AppTec and WuXi Biologics generated approximately 66% and 46% of their revenue, respectively, from U.S. customers. The U.S. Senate and House of Representatives proposals and their spillover effects could seriously impact their business operations or severely restrict their ability to do business with U.S. companies.
At a deeper level, the U.S. move suggests that China's biotech industry is more likely to be disrupted further in the context of great power competition. The U.S. side has not only continuously expanded the scope of application of the concept to suppress relevant competitors, but also made the way of attacking more specific and targeted. As early as 2019, some U.S. lawmakers questioned BGI and WuMing Ming's access to U.S. genetic data through partners through an open letter, and BGI was blacklisted by the U.S. in 2021.
The news of the postponement of the bill has brought good news to the market to a certain extent, and brought the possibility of a turnaround, and the follow-up progress still needs to be tracked. However, the fundamental threat to Chinese biotech companies has not yet been resolved, and the incident once again reminds them to prepare for diversification and circumvention of US sanctions as soon as possible.
Contains: (1) equipment designed for research, development, production, or analysis, including gene sequencers, mass spectrometers, polymerase chain reaction machines, or any other instruments, devices, machines, or devices, including components and accessories thereto of biological materials, and any software, firmware, or other digital components specifically designed for use with such devices and as necessary for the operation of such devices; (2) any services used for research, development, production, analysis, testing, or the provision of information, including the storage and transmission of data related to biological materials, including the use or implementation of described instruments, devices, machines, or equipment to provide advice, counseling, or support services and disease testing, genealogical information, and related services; (3) any other service, instrument, device, machine, component, accessory, equipment, software or firmware deemed appropriate by the Director of the Office of Management and Budget, in consultation with the head of the executing agency.