The new version of the US Biosafety Act (H.R. 8333) (hereinafter referred to as the “Act”) has ushered in the latest developments.

On the evening of May 15, Beijing time, the House Supervision and Accountability Committee voted on-site to approve the Biosafety Law and enter the next legislative process. The new version of the Act requires that the company concerned's existing contract/product exemptions be extended to January 1, 2032, that is, US companies are required to end cooperation with companies covered by the Act before 2032, which means$WuXi AppTec (603259.SH)$Other related companies will be given an 8-year buffer period for their business in the US.

The “Act” passed this time is the latest version announced on May 10, and the content is more relaxed for Chinese companies compared to the previous version. Businesses currently covered by the Act include$WUXI APPTEC (02359.HK)$,$WUXI BIO (02269.HK)$und$BGI Genomics (300676.SZ)$etc. The passage of the new law means that the enterprises involved have a longer period of time to adapt to the new policy environment and actively adjust their own business structures.

On the morning of May 16, Yao Ming Kangde quickly announced:

The company learned that on May 15, 2024, the U.S. House Committee on Oversight and Accountability (“House Committee”) voted to report to the House of Representatives a draft legislation numbered H.R.8333 (hereinafter referred to as “Draft H.R.8333”), which is a revised version of the proposed draft Biosafety Act previously numbered H.R.7085.

The amendments to Draft H.R. 8333 include, but are not limited to, removing various previous allegations against Medication; and adding a non-retroactive clause (“grandfather” clause) to exempt existing contracts signed before the proposed restrictive clause became effective.

However, even though US government agencies already have assessment procedures for national security issues, draft H.R. 8333 still retains the company name Pharmacomics Kangde in the definition of “concerned biotechnology company,” and the company strongly opposes this preconceived and unreasonable definition without due process.

We are convinced that Pharmacovich did not pose a national security risk to the US or any other country in the past, present, or future, and that the company has not been subject to any sanctions by US government agencies.

What is the impact?

The new version of the “Act” voted on this time was released on the evening of May 10. The biggest difference between the new “Act” and the previous version is that it provides an 8-year exemption period, which allows the US to end cooperation with Chinese biotechnology companies specified in the bill before January 1, 2032.

In addition, the new version of the bill added Medicinal Biotech, and the number of Chinese companies covered by the Act increased to 5, including Yao Ming Biotech, Pharmaceutical Kangde, Huada Gene,$MGI Tech Co., Ltd. (688114.SH)$and its subsidiary Complete Genomics.

The original US Biosafety Act was proposed in late January 2024. The original bill proposed that, from the perspective of national biosafety, it was proposed prohibiting contracts with biotechnology suppliers including Pharmacovigilance to ensure that foreign biotech companies cannot obtain funding from US taxpayers. Affected by this negative news, Pharmaceuticals stocks crashed on January 26, 2024 and fell to a standstill for two consecutive trading days.

In mid-March 2024, the original “Bill” passed the US Senate vote and entered the next stage of the voting agenda.

On the evening of May 10, 2024, the US Congress issued a revised version of the “Act”, which was quite relaxed compared to the previous version. The main differences are as follows:

• First, it has extended the period for Chinese and American pharmaceutical companies to stop cooperating. The revised law will restrict US entities from doing business with certain Chinese biotech companies, including Pharmacovigenics and BGI, and clearly require US companies to end cooperation with these companies by January 2032, which extends the buffer time for companies to find new partners.

• Second, the Chinese company involved, Pharmaceutical Biotech, has been added. On the basis of the previous Huada Line, Yao Ming Kangde and its subsidiaries, Pharmaceutical Biotech was added.

Since the US Biosafety Act crisis began at the end of January this year, it has put a lot of pressure on domestic CXO (pharmaceutical outsourcing) companies. The stock price of Yao Ming Kangde, a leading pharmaceutical R&D service company, has crashed several times. Since the beginning of the year, the stock price has fallen by nearly 40%.

Pharmaceutical Kangde is highly dependent on overseas revenue. From 2021 to 2023, Pharmaceutical Kangde's overseas market revenue accounted for 74.67%, 80.88%, and 81.81% respectively, so it was greatly affected by the Act.

A number of investors inquired about the impact of the Act on the company's operations on the interactive platform. Yao Ming Kangde replied to investors that judging from the situation in the first quarter of 2024, the company's overall performance was stable.

Incident review

In late January 2024, proposals related to the US Biosafety Act went into effect. The relevant Senate version of the bill was formed on January 25, 2024. The proposal: From the perspective of national biosafety, it is proposed to ban contracts with biotechnology suppliers, including Pharmacom Kant, to ensure that foreign biotech companies cannot obtain funding from US taxpayers. On January 26, 2024, Pharmaceutical stocks crashed and fell to a standstill for two consecutive trading days.

On March 6, at the US Senate Committee on Homeland Security and Government Affairs hearing, market concerns further intensified after the Senate version of the “Biosafety Act” passed with a high vote the provisions against the drug Kantar.

On the afternoon of March 7, Yao Ming Kang issued a clarification notice stating that the company strongly opposes this kind of pre-emptive and unfair definition without due process, and that Yao Ming Kangde did not in the past, present, or future pose a national security risk to the United States or any other country. The company also once again reiterated that Yao Ming Kangde has no human genomics business, nor does the company collect human genomics data in any of its current businesses.

On March 13, the US Biotechnology Innovation Organization (BIO) issued a statement announcing that it will support the US Biosafety Act and will cooperate with the US Congress as the legislation progresses. The organization terminated its cooperation with Pharmacovigant.

On May 10, the US issued a revised “Biosafety Act” to give more time to sever ties between Chinese and American biotechnology companies. The bill will require US companies to end cooperation with these companies by 2032.

Editor/Somer