Developing Story: BIOSECURE & Protectionism
Pharma companies are closely observing a new proposed legislation in the US, supported by Republicans and Democrats, called the BIOSECURE Act. The policymakers argue that the law would protect Americans' genetic data against a backdrop of China seeking to "dominate the biotechnology industry". Similar to the ban of Huawei, ZTE in telecommunications, BIOSECURE would ban the collaboration of US federal agencies (and, by extension, pharma/ biotech using US grants) with the following Chinese research and manufacturing contractors:
These CRDMOs (Contract Research, Development and Manufacturing Organizations) are often used by big pharma companies to provide additional R&D and manufacturing capacity - biotech and smaller pharmaceutical companies can have an even stronger dependency on CRDMO capacities.
Merck & Co's 10K report from 2023 flags disruption of collaboration with Chinese companies as a key risk, highlighting Wuxi AppTec by name:
Wuxi alone is reported to make roughly 2.5 bn USD in sales in the US - meaning that the BIOSECURE Act, if passed, would lead to a massive shift in R&D and Manufacturing capacity. Impacted companies may include GSK, AstraZeneca, Sanofi and Vertex (Pharmaceutical-Technology.com).
The importance of physical manufacturing infrastructure
The dynamics around BIOSECURE shine new light on Novo Nordisk's acquisition of Catalent, a US-based CDMO - a rather atypical deal as Catalent is also one of the key manufacturers of direct competitor Eli Lilly. Recent articles reframe the deal and highlight manufacturing capacity as a source of competitive advantage:
Novo Nordisk and its GLP-1 drug are likely not directly affected by the BIOSECURE inclusions; however, the acquisition could point to thoughts of the sourcing "meta" shifting towards a more insourced, onshore model.
Other signals point to a potentially more measured reaction of shifting capacity to other outsourcing locations - Swiss giant Lonza and South Korea's Samsung Biologics often being cited as the prime alternative (KoreaBioMed.com).
What's next
In mid March, one of the drivers of the BIOSECURE Act, Rep. Mike Gallagher, announced his resignation, likely taking steam out of the initiative. Still, it seems, protectionist sentiments remain strong in US policy and it is likely that the crackdown on Chinese technology in pharma may continue (Biocentury.com)
For pharma companies, agility might remain the top prescription - securing their value chains against expected threats while being ready to quickly change strategy and re-direct investments in case rapid evolution and adaption to the environment is needed.