This afternoon, the “Pharmacomics” led a number of CXOs and the innovative drug sector to collapse. The reason directly pointed to a US “Life Safety Act” proposal circulating in the industry. A number of listed companies “named” by the proposal told reporters that they are evaluating the impact; there is no need to be too pessimistic.

Industry experts also told the reporter that the bill is currently only a proposal; it may not necessarily pass. After all, there is no bipartisan consensus on cases such as PBM or high-priced drugs. The market is a bit overly fearful, and there is still demand for US biopharmaceuticals in China.

However, some experts also told the reporter that although this is not the first time that Yao Ming has encountered such an incident, the trends revealed by the bill are still worth being wary of, and relevant listed companies and relevant departments should also adopt a “bottom line mindset” and prepare early.

Biomedical concepts plummeted, listed companies say they are evaluating the impact

In the afternoon, Hong Kong stocks of biomedical concept stocks and ETFs took a sharp turn. A-shares were represented by Pharmaceutical Kangde. CXO and the biomedical sector began to dive across the board. Hong Kong stocks plummeted in the afternoon and drove the biomedical sector downward. By the close,$WUXI BIO (02269.HK)$An intraday high of nearly 27%, closing down 18.17%;$WUXI APPTEC (02359.HK)$The highest intraday drop of more than 31%, closing down 16.43%;$WUXI XDC (02268.HK)$It closed down 20%. In terms of other H-share individual stocks,$GENSCRIPT BIO (01548.HK)$fell 12.59%,$PHARMARON (03759.HK)$fell 15.05%,$TIGERMED (03347.HK)$It fell 9.93%.

The dire situation is also driving the trend of the index.$CSI Health Care Index (000933.SH)$fell 2.2%,$CSI Health Care ETF (159929.SZ)$fell 2.4%,$China Universal CNI HK Connect Innovative Drugs Industry ETF (159570.SZ)$It fell 7.45%.

The reason for the collapse of the domestic biomedical individual stock secondary market may be related to the news that “the US is planning to introduce the Biosafety Act.”

According to the official website of the US House of Representatives “US-China Strategic Competition Special Committee”, its chairman Mike Gallagher (R-WI) and senior member Raja Krishnamorti (D-IL) proposed a bill today to ensure that foreign biotech companies cannot obtain funding from US taxpayers. Once passed, the bill would restrict federally funded healthcare institutions from using foreign rival biotech companies, including BGI Group and its subsidiaries$MGI Tech Co., Ltd. (688114.SH)$and Complete Genomics, and another Chinese company, Pharmacom Kangde.

In the above article on the website, it was stated as follows: “Chinese biotech companies are collecting genetic and sensitive health data from millions of people around the world through medical diagnostic tests...” “As the field of biotechnology becomes more and more important in everyday life, the threat posed by biotech companies controlled by foreign rivals continues to grow.”

In the afternoon, the reporter contacted a number of listed companies involved as investors. BGI said that the company has taken note of the proposed US biosafety bill, but it does not believe that the company's stock price trend is directly linked to the bill. The company's management will evaluate and discuss this incident. If it actually has a serious impact on the company's performance, it is not ruled out that it will actively communicate with the US side. If the bill is actually introduced in the future and has an adverse impact on the company's performance, the company will also disclose it.

Huada Intelligent Manufacturing said that the company is verifying and evaluating the impact of the relevant US biosafety law proposals on the company and the company's countermeasures. The relevant evaluation progress is uncertain, and the evaluation will be carried out as soon as possible. Investors are requested to wait patiently. As for stock price fluctuations, this is affected by many factors; it cannot be said that this incident is related to stock prices.

As the “most impacted” victim, Yao Ming Kangde said that the company will issue an announcement in the evening.

Also, according to media reports, in response to individual US lawmakers proposing relevant biosafety law proposals to ban foreign biotechnology companies such as Huada Genomics and Pharmaceutical Kangde, Yao Ming Biotech CEO Chen Zhisheng said to the outside world, “This is just an anti-Chinese congressman's proposal. It is a very unlikely event until it becomes law, and it will take several years. I personally have never served in any military agency. We will announce clarifications soon.”

Excessive market panic? Industry says bottom-line thinking is still needed

“Mike Gallagher proposed 161 bills, and in the end, only 2 became law. This incident had no substantial impact on Pharmacovigilance.” Chen Zhisheng issued this judgment to the outside world.

In fact, this is not the first time that Pharmacovigilance has been “deliberately suppressed” by the US government. As early as February 2022, the US Department of Commerce released an export control report that will add 33 new Chinese entities to the Unverified List (UVL), including the two subsidiaries of Yao Ming Biotech (Wuxi) and Pharmaceutical Biotech (Shanghai).

At the time, this news caused the stock prices of listed pharmaceutical companies to open lower across the board on the morning of February 8. The main character, Yao Ming Biotech, was even violently suspended more than an hour after opening. The drop before the market was 22.77%, and the highest drop was as high as 31%. A-share Yao Ming Kangde also directly fell to a halt at the beginning of the session. It struggled slightly at the end of the session, and finally lay flat to close.

Zhao Heng, founder of medical strategy consulting firm Latitude Health, told reporters that the bill was only a proposal; the committee did not pass it, let alone in the House of Representatives. Mike Gallagher is a well-known hawk in the Republican Party, so it's not easy to say whether it can be passed. After all, there is no bipartisan consensus like PBM or high-priced drugs. “So the market is a bit overly fearful, but it also shows that the market is worried. After all, this is an election year, so everyone has to express their tough positions.”

Wang Heng, general manager of Beijing Baisili Marketing Planning Co., Ltd., also told reporters that the biomedical industry is a common topic shared by humans. It should have been a field without borders and unrelated to politics. Domestic biomedical companies have always estimated geopolitical risks. If the bill is passed, this will have a big impact on some companies that originally had a large proportion of their business in the US and overseas.

However, Zhao Heng believes that there is still demand for biopharmaceuticals in China, and market demand can be forcibly decoupled, but the industry is very difficult.

“Although this bill has just been proposed by (individual) members of parliament, it also represents a malicious trend. Relevant companies, and even relevant authorities, should take this opportunity to carefully evaluate how the worst situation will evolve, stick to the bottom line thinking, promote closer cooperation between domestic enterprises upstream and downstream in the industrial chain, and gather to warm up to resist the arrival of this 'gray rhinocerone'.” Wang Heng said.

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