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Biosecure Act raises questions for burgeoning biotech sector

Katie Tabeling

Momentum is building on a bill on Capitol Hill that may make it more difficult for smaller Biotech companies to do business.| PHOTO COURTESY PAULA NARDINI/PEXELS

WASHINGTON D.C. — A bill making its way through Congress that takes aim at selecting Chinese biotech firms and blocking them from doing business in the United States has quietly raised concerns among Delaware’s biotech industry.

The Biosecure Act was released from the House Committee on Oversight and Accountability on May 15. Specifically, the bill would prohibit the U.S. government — and companies backed by federal dollars — from contracting with “biotechnology companies of concern.” The latest draft of that legislation includes BGI, MGI, Complete Genomics, WuXi AppTec and WuXi Biologics.

Supporters of the legislation on Capitol Hill maintain the law is needed to keep Americans’ health and genetic information out of foreign nations — and that it’s dangerous for China to control the lion’s share of the supply chain. But for small and rising biotech and pharmaceutical companies, the Biosecure Act raises questions on how it could impact sourcing and outsourcing some manufacturing needs.

Right now, in Delaware, a $500 million pharmaceutical plant that is being built by one of the “companies for concern” is nearing completion. WuXi STA, a subsidiary of WuXi AppTec, has long planned a 190-acre pharmaceutical campus in Middletown. The project was awarded $19 million in state taxpayer-backed grants and is projected to employ north of 500 employees in its first year.

The Delaware Prosperity Partnership told the Delaware Business Times in an emailed statement that “we are focused on securing capital investment and jobs for our state and residents, and we did that when we helped WuXi STA choose Delaware three years ago.” The DPP added that while it was aware of the issues on outsourcing and sourcing capacity that the Biosecure Act may present, it was difficult to predict its impact at this time.

“Industries adapt and react to a changing landscape all the time. Regardless, DPP feels certain that life sciences are and will be a major driver for our state for many years to come,” reads the DPP statement.

Meanwhile, smaller biotech firms are already accessing the potential outcomes that tense trade relations between China and the U.S. may have on their business. A survey from trade association Biotechnology Innovation Organization shows that 79% of 124 respondents have at least one contract or product agreement with a manufacturer based in China or owned by China. More than two-thirds of the survey respondents are small firms with less than 250 employees.

Delaware has been rising in the biotech and life sciences sector with the state alone employing approximately 11,000 people among small start-ups and giants like AstraZeneca. But the companies that are working to find their footing still rely on research development and manufacturing partnerships overseas to manage some of the costs. 

The fastest growing segment of the Delaware bioscience community are firms with five employees or less, namely a scientist that spins off a large company like DuPont or an institute like University of Delaware.

Michael Fleming, the president and CEO of the Delaware Bioscience Association, said that the First State has a robust life science ecosystem in part due to its close proximity to Philadelphia and venture capital avenues in New York City and Boston. Delaware also is growing in its global leadership position when it comes to manufacturing critical medicines. To continue down that path, companies need to establish partnerships with the manufacturing capacity while developing its own contract research and manufacturing sector locally.

“A secure, resilient supply chain is vital to our national security and the continued ability of our member companies and researchers to help families live healthy, productive lives. We need to strengthen our domestic production capabilities while ensuring we don’t lose a step with critical biomedical research patients are relying on for their future,” Fleming said.

Prelude Therapeutics indicated to investors it was watching the activity on Biosecure Act closely, noting in its first quarter report of 2024 that if any new legislation or tariffs or existing trade agreements were negotiated or became strained, “such changes could have an adverse effect on our business, financial condition and results of operations, our ability to raise capital and the market price of our shares.”

Prelude Therapeutics did not respond to Delaware Business Times’ request for comment on the Biosecure Act and its potential impacts to its business.

Incyte has an extensive portfolio of drugs in development and licensing deals in China, and most recently signed a deal with China Medical System Holdings Limited to develop and sell a drug that treats dermatologic diseases like vitiligo. Incyte representatives declined to comment to DBT for this story.

However, recent amendments to the Biosecure Act may aim to ease some of the concerns of companies who have signed contracts. The current version of the bill gives the U.S. Companies until 2032 to sever ties with select Chinese companies and find alternatives. A new provision also opens the door for services or equipment that were handled by companies of concern in the past — but no longer — will be allowed.

Congress has asked the U.S. Department of Defense to look for connections between biotech companies active in the U.S. market and the People’s Liberation Army. That report is expected to be complete in June. U.S. Chris Coons told DBT he will be waiting on the report’s conclusions, noting the delicate position Delaware stands in today.

“Foreign investment strengthens Delaware’s economy and brings jobs to our state. At the same time, those priorities can sometimes conflict with U.S. national security and privacy interests, and we must work to find an appropriate balance in our policy. WuXi is a significant investor in Middletown and I am glad the company has identified Delaware as a hub for innovation in the biotechnology industry,” Coons said. “I look forward to reviewing that report before making any judgment on potential legislation and regulation in this space.” 

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