From The Editor | October 16, 2024

BIOSECURE Act Starts Dismantling WuXi

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By Louis Garguilo, Chief Editor, Outsourced Pharma

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Components of the WuXi global organization are for sale.

It’s a forced divestiture.

WuXi AppTec is marketing at least some of its U.S. and European operations. While no deals or decisions seem to have been made, I’d surmise a final outcome of ownership transfers of at least some of these facilities and operations is now preordained. 

Many Western-based biotechs are now risk-adverse to working with one of the leading contract research, development and manufacturing organizations on the planet.

The ill-advised BIOSECURE Act targeting several China-based biopharma companies is having its intended effects, even before the legislation is fully passed by the U.S. government. 

To be clear, the Act itself – targeting WuXi Apptec along with other Chinese bio-related companies – is considered by many ill-advised. The goal is not. This from the Wall Street Journal just a few days ago:

"Beijing is conducting espionage activities on what Western governments say is an unprecedented scale, mobilizing security agencies, private companies and Chinese civilians in its quest to undermine rival states and bolster the country’s economy."

But if the U.S. Congress wants to make a difference in the fight against the China Communist Party (CCP), this is not the way.

Facilities For Sale

According to the Financial Times, WuXi AppTec has put its cell and gene therapy manufacturing arm, WuXi Advanced Therapies, on the market. That organization operates four laboratories and manufacturing facilities in Philadelphia.

Let that sink in.

These facilities are in the U.S., as are so many of the WuXi-branded facilities.  

They assist mostly U.S.-based biopharma and many start-ups.

WuXi has invested hundreds of millions of dollars here and in Europe, and employed and trained thousands of skilled workers.

Here’s what an outsourcing professional told me in an earlier editorial about partnering with some of these operations:

WuXi Apptec and WuXi Biologics to date have been my best CDMOs for both small molecules and biologics, in terms of quality, timeline, cost and communication ...”

Regarding WuXi Biologics specifically, the Financial Times reports that “three people familiar with the situation” said that organiation is testing out interest in some of its European production facilities.

This is doubly troubling. Here’s a quote from an interview with Rick Connel of Wuxi Apptec:

WuXi Biologics is a separate company, independently owned and operated … the only connection [to WuXi Apptec] is the founder. There certainly are other high profile serial entrepreneurs in the world ... We do not interface with WuXi Biologics.”

Nonetheless, like much of the BIOSECURE Act, there is condemnation by assumed association. Just like the language in the Act suggests WuXi Apptech is guilty of (still undocumented) bad behaviours because it is China-based, all of the WuXi ecosystem seems fair target by association.

So today, the U.S. government has effectively raised the risk-level of working with one of the finest contracting organizations in the world to the point where biotechs are very hesitatant to select it as a partner, and the CDMO must take actions.

Sales Are Down

Discussions with competing CDMOs actively vying to purchase WuXi assets have been ongoing for months, we are told. 

Just what we need. More CDMO consolidation.

WuXi facilities are state-of-the-art, still have an existing clientele (the Act allows existing contracts with WuXi to continue to completion), and a workforce with tons of experience.

Thus, despite the overall circumstances, I believe these locations will not go cheaply – meaning we can expect the bigger CDMOs with deeper pockets will be the highest bidders.

I have zero knowldege of any discussions. But I can hypothisize:

Would the outsourcing world be better served if these facilities get bought up by, for example, a Lonza, Catalent, or Thermo Fisher?

Nothing against these or other fine organizations, but does this serve biotechs or ultimately patients?

Perhaps a newy organized, or existing smaller CDMO, may be able to wrestle the sites.

Whichever, the Financial Times reports new business for WuXi operations in Europe has been drying up for months.

Biopharma companies working with (or trying to secure) U.S. federal contracts will have to pull out of WuXi. Already, it is reported revenues from European customers fell 27% the first half of 2024 when compared to a year earlier.

Still, WuXi Biologics, for example, continues to present a bold front.

It told the FT it continues to experience good business momentum. “We are consistently securing new projects across all regions including the US, EU, China and the rest of Asia,” WuXi Biologics has stated.

And of note – still of note, I should say – the time left for the Act to pass in this legislative session is narrowing as we are one month away from the next election, and congress.

Support For An Ally To Biopharma

WuXi entities continue to assert they’ve acted in no unbusiness-like manner or compromised any IP; they also operate independently from each other; and are under no control of the CCP.

In fact, WuXi Apptec, WuXi Biologics and other WuXi operations have played a major role in our biopharma outsourcing model.

The Financial Times reminds us WuXi Apptech contributes to the production of AbbVie’s $3.5bn a year cancer drug Imbruvica, and Pfizer’s anti-Covid pill Paxlovid, among dozens of other medicines, citing GlobalData.

More than 20 drugmakers have flagged their reliance on WuXi companies in regulatory filings this year, according to AlphaSense.

The FT reports that among WuXi Biologics assets being reviewed for sale are two German manufacturing facilities purchased from Bayer and spent extensively on expanding last year, and production facilities in Ireland.

I have to ask:

Biotechs and pharma professionals in Europe as well as the U.S., what are your thoughts on all this? You are effectively caught in the middle of growing commerce-if-not-cold war between the U.S. and China.

How much resistence, how vocal, or how much in the background have you registered your opinions to the U.S. Congress on this matter?

It is not too much to assume that with this initial salvo, other components of our global discovery, development, and manufacturing outsourcing model will also come under one kind of scrutiny or another.

As I have written, in what can only feel like an early jab in the back, the Biotechnology Innovation Organization (BIO) came out swinging at WuXi and supporting the government in its assertion WuXi AppTec is a bad actor.

Bottom line: The Biosecure Act calls out WuXi as a “biotechnology company of concern.”

That concern burns the word "risk" into the forearms of every biotech or pharma professional who outsources today.