Source: Caixin.
Author: Hu Jiarong

Benefiting from the bullish news over the weekend, most Hong Kong pharmaceutical stocks strengthened. As of publication, $WUXI BIO (02269.HK)$ Rise more than 9%, $WUXI XDC (02268.HK)$ rose more than 8%, $WUXI APPTEC (02359.HK)$ up more than 7%.

On December 7 local time, the usa House Armed Services Committee publicly released the final negotiated text of the Fiscal Year 2025 National Defense Authorization Act (hereinafter referred to as "NDAA"), which was discussed with members of the Senate Armed Services Committee. Notably, this NDAA, which is about to be submitted for review, does not include the biosecurity bill.

Earlier, according to media reports, U.S. legislators were actively considering revising the "Biological Safety Act" in order to achieve a more compromising version. The core of this new version is to introduce an administrative review process for relevant companies, rather than directly prohibit cooperation between biopharmaceutical companies and Chinese companies.

The biosecurity bill once put pressure on the domestic pharmaceutical industry.

Since the beginning of this year, the "Biosecurity Bill" has cast a shadow over china's biomedical industry. The usa House and Senate have been promoting the legislative process of the "Biosecurity Bill" in their respective chambers and have also attempted to push the "Biosecurity Bill" into the Fiscal Year 2025 NDAA, but so far, as the current session is about to end, the legislative process of the "Biosecurity Bill" has ultimately not been completed.

Taking wuxi bio and wuxi apptec as examples, both of these companies saw cumulative declines of over 20% from January 26 to 29 this year.

In fact, the biomedical safety bill is more bearish for large pharmaceutical companies with significant overseas income. Taking wuxi apptec as an example, nearly 80% of the company's revenue comes from overseas, with revenue contributions from USA clients increasing from 55% to 66% in recent years. Therefore, changes in the USA market have a significant impact on wuxi apptec's market cap and business.

Furthermore, the biomedical safety bill requires a ban on contracts with biotechnology suppliers including wuxi apptec and wuxi bio. This means that if the bill ultimately becomes law, wuxi bio could potentially face the loss of some opportunities in the USA market.

Additionally, according to a previous report by Shanghai Pudong Development Bank International, the probability of the biomedical safety bill being legislated separately may increase after Trump's election, and the process of overseas interest rate cuts may slow down, which could lead to a bearish market sentiment in the CXO industry.

What is the outlook for the biomedical safety bill going forward?

From the news and stock performance mentioned at the beginning, the exclusion of the defense authorization bill from the biomedical safety bill for fiscal year 2025 has indeed boosted short-term market confidence. Lawyer Zhan Kai, a partner at Shanghai Yuan Da Winston, who is familiar with the legislative operations of the USA Congress, stated, 'Based on the current situation, it is highly unlikely that the biomedical safety bill will be legislated this year, and it is hopeless to be included in the NDAA. Congress's current session is coming to an end, and there is not enough time for separate legislation.'

He also pointed out that 'next year's Congress will be led by the Republican Party, and related provisions may become stricter, but the bill may be affected by the overall direction of China-USA relations. The incoming Trump administration has already shown significant changes compared to the Biden administration, and the biomedical safety bill will be a lever with strong uncertainty; it is possible that a package of understandings between China and the USA in technology and biomedical fields may emerge.'

Editor/Jeffy