dailypharmkorea

Opinion
[Reporter’s View] Benefits of the U.S. Biosecure Act
by Son, Hyung Min Sep 13, 2024 05:50am
The US House of Representatives recently passed the Biosecure Act, which includes the US’s biological sanctions against China. The bill will now head to the US Senate for voting and go through a presidential review process for legislation. The Biosecure Act restricts transactions with major Chinese biotech companies that the U.S. Congress deems to pose a threat to national security. The US Congress has categorized the biotechs into 3 groups, A, B, and C. Group A includes 5 companies: BGI, MGI, and Complete Genomics, which are genomic equipment manufacturers and analytical services, and Wuxi AppTec and Wuxi Biologics, which are contract development and manufacturing organizations (CDMOs). Group B includes companies that are under the control of a foreign hostile government, provide equipment or services to companies on the list of biotechnology companies of concern, or pose a risk to U.S. national security, and Group C includes subsidiaries and parent companies associated with companies in Groups A and B that are under the control of a foreign hostile government. The Biosecure Act will be implemented after a grace period until January 2032, but already expectations are rising on how Korean companies can benefit from the Act. In particular, the inclusion of Wuxi Biologics, China's largest CDMO, in the sanctions has raised attention to the opportunity it brings to other domestic CDMOs such as Samsung Biologics, Celltrion, and ST Pharm. Wuxi Biologics is present in China, the US, Ireland, Germany, and Singapore, and employs more than 12,000 people. The company occupied 10% of the global CDMO market last year. In fact, ST Pharm is believed to have benefited from the proposal of the Biosecure Act, signing contracts previously made with China. Last month, the company was also selected to supply a small molecule blockbuster drug that generates trillions of wons in annual sales. However, we cannot have blind faith that domestic companies will reap all the benefits. The market is dominated by leading global CDMOs such as Switzerland's Lonza, the US's Catalent, and Japan's Fujifilm, all of which have their eyes on Wuxi Biologics' pie. Their competitive advantage is quality. Based on their years of experience in signing contracts with global pharmaceutical companies, the companies have been expanding their market. Global CDMOs have strong technical capabilities in early research, manufacturing, and commercial finishing processes. Indian companies that own price competitiveness are also emerging as viable competitors. Currently, India has more than 15,000 drug manufacturing facilities owned by around 3,000 pharmaceutical companies. Of these, it is estimated that at least 100 of which are specialized CDMOs. India has 40% lower drug manufacturing costs than the US and Europe, and has the highest number of US Food and Drug Administration (FDA)-approved pharmaceutical plants outside the US. In other words, to survive, domestic companies need to secure production capacity, quality, and technology, not settle for just a slice of Wuxi Biologics' pie. Global CDMOs have invested in cell gene therapy (CGT) and antibody-drug conjugates (ADCs) to win orders. Currently, domestic CDMOs are still in the investment stage for ADCs and CGTs. In addition, there is also a possibility that the U.S. will extend the protection of its industry and sanction more companies. In 2022, the U.S. administration has implied restricting overseas companies by proposing an executive order to increase domestic production of biopharmaceuticals. Policies aimed at increasing domestic production and protecting its own biotech sector are bound to be a blow to companies looking to enter the US. In this sense, it is not impossible that the knife pointed at China could be extended to other countries. This is where the government’s support comes into play. While the current government has signaled that it sees the bio-industry as a future growth engine and is committed to implementing relevant policies, there is a consensus that the industry has not felt the impact so far. Experts believe that the government needs to continue to support the industry by increasing the scale of government support and providing tax incentives. In the current state, The US Biosecure Act is clearly an opportunity for domestic companies. If the companies continue to seek growth based on their investment and technological capabilities and are supported by the government, they will be able to enter the global market.