In an era where globalization and protectionism coexist, the rapid iteration of cutting-edge technologies and the multiple constraints of policies and capital pose unprecedented challenges for pharmaceutical innovation companies. They must not only cope with issues such as multinational regulation and high costs but also bear the medical ethical responsibilities of the international community to ensure that patients can obtain timely treatment.

For companies focused on cell and gene therapy (CGT), this pressure is even more pronounced: on one hand, there is the 'unique treatment opportunity' brought by personalized therapy, and on the other hand, the layered regulations and industrial barriers.

In the past year, the topic of 'biosecurity law' has been frequently mentioned in the political arenas of many countries, and the trends of related reviews and restrictions have attracted widespread attention. For large innovative drug research and development companies like WUXI APPTEC, which have a high degree of internationalization and extensive layout, this not only means an increase in challenges in an already extremely complex business environment but also concerns the vital interests of countless patients and practitioners.

Recently, WUXI APPTEC announced that it would sell its cell and gene therapy (CGT) business's operations in the USA and United Kingdom to the USA-focused private equity fund Altaris in the medical care industry. Once this move was disclosed, it sparked a heated discussion in the industry: is this related to the 'biosecurity law'? What considerations did the company undergo to make this decision?

The 'biosecurity law' in the legislative process: the beginning of the sale, but not necessarily the fundamental cause

The seemingly 'lofty' biosecurity law initiative conceals numerous industrial protection purposes and the interplay of interest groups. Rand Paul, a politician in the USA, has publicly expressed doubts about the related legislation, accusing it of not actually aiming to defend national security interests but rather to create an unfair competitive environment for specific interest groups, which constitutes a narrow form of protectionism.

Indeed, for such legislation, slogans like 'national defense' and 'public safety' largely act like interchangeable 'cloaks', all aimed at targeting specific entities that are difficult to defeat through market competition under equivalent conditions.

However, the disruption is not limited to fairness. The research and development of drugs from the laboratory to clinical trials and then to approval takes an average of at least several years. Manipulations achieved through slogans like "public safety" can likely lead to missing the market window for the potential best therapies for a patient group.

While companies losing competitive equilibrium can still adjust and retaliate in the market, patients undergoing specific disease courses lose treatment options, and the damage they suffer is difficult to make up for. Especially for highly personalized treatment plans like CGT, which cannot be replicated or substituted, there is a greater need for "time" and "efficiency" to work together for the benefit of the patients.

WUXI APPTEC is thriving due to the collaborative needs of the Global Innovative Drugs industry. In the Innovative Drugs industry, the existence of CXO essentially represents extreme specialization within a Global context. The company's ability to become a leading Global platform for drug research and development and production services in just a few decades is precisely based on its outstanding research and collaborative capabilities, gaining the trust of Global clients.

Now standing in the spotlight as a primary target of the "Biopreparedness Act", WUXI APPTEC indeed has to weigh the pros and cons from all sides, especially the actual needs of patients. For WUXI APPTEC, the current choice is truly not an easy one.

This sale is not merely aimed at reducing risks related to the biopreparedness legislation. The environment the company is currently in has been clear and predictable for a long time; if risk reduction were the top priority, related asset divestiture and sales could have been initiated around mid-year at the best timing, without waiting for the legislative process to advance further until now.

It is evident that behind this sale, in addition to the legislation itself, WUXI APPTEC has many more considerations.

The special situation of the CGT industry - weakening financing and intensified Global regulation.

The financing condition of the CGT sector has not been very optimistic in the past two years. According to Jefferies' analysis data in November, overall financing for the Global Biomedical sector has increased by 43% year-on-year in 2024, while financing for CGT has decreased by 13% year-on-year.

In the past two years, the Global monetary environment has entered a tightening cycle, with a large amount of venture capital and private equity favoring investments in more stable and high-certainty Biomedical sub-sectors while being cautious about CGT, a sector with a longer cycle and higher technical and clinical risks, even beginning to withdraw.

On the demand side, CGT is still exploring broader indications and more mature commercialization paths; the cooling on the capital side has put enterprises under greater budget pressure in R&D and clinical trials. As a result, the overall prosperity of the Industry has declined, and some companies can only slow down or even freeze some projects.

However, the weakening of financing in the Industry is just one part of the picture.

The greatest advantage of CGT lies in its "tailored" approach, with its core technology based on patient-derived cells or the genomic information of individuals carrying disease-related mutations. Because of this, such information is highly sensitive and subject to increasingly stringent regulations globally.

For instance, due to considerations related to National Security and personal privacy protection, many countries have implemented strict restrictions on the cross-border flow of biological information, even banning the export of biological samples and important genetic data.

For Innovative Drugs that require multinational R&D and commercialization, such regulations not only significantly raise compliance thresholds but also sharply increase the demand for "local production." Companies are compelled to establish factories or technology platforms in target markets to meet local regulatory authorities' real-time monitoring requirements for production processes, data management, and clinical trials.

In addition, autologous cell therapies require highly personalized collection, preparation, and production processes. This means that it is difficult to expand production according to the traditional large-scale industrial model for pharmaceuticals. Individualization leads to high costs, complex process management, and a strong reliance on expert teams. From the perspectives of payers and regulatory agencies, how to promote these cutting-edge treatments within economically acceptable limits has always been a global challenge.

Solving the problem is all about the patients.

In recent years, WUXI APPTEC has utilized its Global platform and "integrated" service model, continuously leading with technology to help many patients achieve better treatment outcomes.

Chris White from the USA is one such patient struck by a "rare cancer." He was diagnosed with stage IV anal mucosal melanoma at the age of 36, which is rare and highly malignant. Initially, he thought the lump he discovered was hemorrhoids, only to find that the tumor had already spread to lymph nodes, lungs, liver, and kidneys. He tried surgery, chemotherapy, immunotherapy, and targeted therapy at multiple Hospitals, but the effects were not satisfactory. An episode of colitis forced him to pause immunotherapy, as time passed amidst the progression of the inflammation and exhaustion of steroid usage.

It wasn't until October 2019 that Chris had the opportunity to participate in a TIL (tumor-infiltrating lymphocyte) clinical trial. By extracting and expanding immune cells from the tumor tissue and then reinfusing them back into the body, TIL hoped to help the body quickly recognize and engulf cancer cells. Fortunately, Chris's condition improved rapidly within months, and by early 2021, doctors declared that his cancer had "completely disappeared."

The "unsung hero" supporting the successful approval of this therapy for market (launched in 2024 by Iovance) is WuXi ATU, a subsidiary of WUXI APPTEC that focuses on cell and gene therapy. Its Philadelphia base not only neighbors Iovance but has also provided comprehensive support in research, clinical trials, and commercialization since 2015. It is this well-established supply chain that allows many "emerging pharmaceutical companies" to focus on innovation while providing chances of life for patients like Chris White, who were previously considered "untreatable."

Similar cases are not rare. Kyverna Therapeutics publicly stated that WUXI APPTEC is the sole supplier for the production and testing of its self-immune cell therapy (KYV-101), and if forced to "cut supply," it would be difficult for them to find comparable and affordable services within the USA. Another company engaged in innovative cancer therapies, Wugen, described that "although many vendors claim they can do cell production, the actual results may differ significantly."

In other words, when technology, talent, and supporting facilities are so scarce, any political or administrative intervention could rob patients of their most precious opportunity for treatment. Biomedical investor Steven Altschuler has also warned in local media in Philadelphia: if the production support from WUXI APPTEC is "cut off," it would be difficult for the USA, Europe, or Asia to quickly fill this gap in terms of capital, knowledge, and experience in the short term.

Although the biosafety acts and regulatory controversies seem grand, it is actually these patients—specific lives—that are affected.

It is not simply a matter of business "handing off", but rather ensuring the continuity of the operation, eliminating uncertainty for patients and clients.

Only by fully understanding this background can one comprehend WUXI APPTEC's unusual selling behavior this time - the decision to sell the ATU business in the USA and United Kingdom is largely to eliminate policy risks, ensuring that client projects on the ATU platform continue to progress smoothly, avoiding the impact of administrative intervention/regulatory intensification on patient interests.

It is noteworthy that WUXI APPTEC did not simply 'dispose of' the ATU business, but chose an investment institution like Altaris that has a clear philosophy of 'improving the medical system and patient outcomes.'

Altaris has focused on the medical field for many years, emphasizing capital investment to help medical companies enhance efficiency and innovation levels, thereby allowing more patients to access advanced treatments. This aligns closely with WUXI APPTEC's principle of 'customer first, patient first,' and WUXI APPTEC views this as a guarantee for the technical staff and scientific team of ATU to continue to utilize their expertise.

This transaction has a limited short-term impact on WUXI APPTEC's revenue or profit; according to the announcement, from January to November 2024, the combined revenue of Advanced Therapies and Oxford Genetics is approximately 0.98 billion yuan (unaudited), accounting for 2.4% of the company's most recent audited annual revenue; however, through this transaction, WUXI APPTEC has achieved a more important goal - to ensure that related patients can continue to receive support, minimizing uncertainty.

Progress is the sustainable foundation.

CGT is still constrained by high production costs and stringent biosafety reviews. However, many industry opinions believe that as technology continues to iterate, for example, the advancements in universal cell therapy (which can be standardized and produced in batches), many of the current regulatory or administrative barriers will be resolved by technological power, and market demand and regulatory models will accordingly upgrade.

Once universal therapies achieve large-scale commercialization, patient accessibility will be qualitatively improved.

The future of pharmaceutical research and development will undoubtedly enter an era of 'multiple parallel advances': small molecule drugs, large molecule biologics, new molecules (nucleic acids, mRNA, gene editing), cell therapies, and gene therapies will each play their respective advantages.

WUXI APPTEC emphasizes "following molecules and following customers" in hopes of providing the most comprehensive solutions for different technological routes within this integrated landscape. As regulations gradually improve and technologies mature, it will also be the time for such versatile platforms to surge again.

Whether it is trade barriers or industry protectionism, they ultimately cannot withstand the market momentum formed by "technological advancement + huge clinical demand", nor can they stop the sincere determination of those in the Innovative Drugs Industry to support the interests of patients. From another perspective, the sudden increase in trade barriers and protectionism impedes the flow of innovation, resulting in a decrease in innovative activities, which will make everyone more dependent on those platforms with capabilities and scale.

Conclusion: Maintaining faith amidst setbacks, the progress of CXO to meet the needs of different types of customers is unstoppable.

Looking back over the past year, it has undoubtedly been a challenging and uncomfortable year for WUXI APPTEC and the entire China CXO Industry. In reality, it also reflects a process of rebalancing within an orderly framework, with the future being one of coexisting internationalization and localization. From the perspective of the pharmaceutical industry, diseases are a global issue, while some technologies and capabilities indeed require localization.

CXO companies must not fear disturbances in the external environment, uphold values and missions, and make the most pragmatic strategic choices. After all, in the life-related race of pharmaceuticals, not only is the support of capital and technology needed, but companies must also maintain their belief in their cause and their commitment to patients.

When technology and demand resurge in the next window period, CXO companies like WUXI APPTEC, with their global platforms and complete industrial ecosystems, will continue to be an indispensable force in promoting pharmaceutical innovation and protecting patient welfare.