Is WuXi AppTec An Enemy Of The State?

By Louis Garguilo, Chief Editor, Outsourced Pharma

I have zero sympathies for the Chinese communist regime.

My stance on tariffs and other economic and market-access blocking measures to combat the regime is more ambivalent. In rare cases, I believe tariffs or other retalitory regulatory and trade measures are warranted.

But is WuXi AppTec an enemy combatant against the citizens of the U.S.?

As many of you have heard by now, a U.S. House Select Committee on China has introduced a bill restricting “federally funded medical providers” from allowing WuXi Apptec and other biotech companies from receiving “genetic information about Americans.”

This sounds rather targeted in nature, but those I’ve spoken with say it is more serious in applied scope.

The bill, more specifically, would prevent federally funded medical providers from using products manufactured, or services provided, by what are described as "foreign adversary biotech companies of concern."

This apparently includes WuXi AppTec, which the bill identifies as affiliated with China’s People’s Liberation Army.

Competitor Or Combatant

In an open letter, Ge Li, Ph.D., Chairman & CEO Of WuXi Apptec (and two other co-CEOs) wrote that “for more than 20 years, WuXi AppTec has enabled thousands of customers across the pharmaceutical and life sciences industries to discover, develop, and manufacture new medicines to benefit patients.”

Li says WuXi is guided by the core value of “doing the right thing and doing it right,” and remains so “despite recent unfounded and misleading claims about our company.”

He calls the legislative initiative misguided, and states, “WuXi AppTec does not pose a national security risk to any country.”

Here’s what I know personally about WuXi.

Those 20 years ago when it started out, I was in global business development for a U.S.-based CDMO. We came in sudden, rather shocking, and direct competition with this emerging brand from China – with pricing for FTEs (full-time equivalents) and services well below any we could remain profitable offering.

While WuXi, in my estimation, posed no “national security risk,” the risk to U.S.- (and European-) based CDMOs, and thus some economic risk, was real.

Was there “market manipulation” involved? Among other market/trade issues, WuXi certainly received copious funding from the China government to get established and continue to ramp up.

Therefore, strictly from the vantage point of drug development and manufacturing outsourcing in the U.S., WuXi emerged as a foreign adversary of sorts.

But I can also say the following.

I’ve been in my current role of following the global outsourcing industry for a decade since that time in business development, and have spoken with countless biopharma organizations.

Never have I heard a customer of WuXi register regret over working with the company.

Just a few days ago I received correspondence from a reader whose career spans big to medium to emerging biopharma organizations in the U.S., and has outsourced extensively and globally through them all.

He’s been following closely the news about the “bipartisan bill targeting Chinese companies, including WuXi Biologics and WuXi Apptec.”

“The potential of sanctions on WuXi has us very worried about overall capacity, especially for end-to-end services that WuXi offers,” he writes.

He then mentions what had also been part of my initial reaction to the timing of this proposed legislation. I thought:

On the heels of the Novo-Catalent news, here we go again? More erasure of outsourcing capacity and optionality?

But even worse, this time the loss of capacity would be government induced – not a part of more organic industry adjustments.

Already, writes this reader, there are “a limited number of reliable CDMOs that offer that range of capability beyond WuXi and Catalent, and it is a real strain for small companies to manage multiple CDMOs.”

So WuXi was, and perhaps still is, a threat to U.S.-based CDMOs, while the loss of access to WuXi would be a loss to U.S.-based customers.

Furthermore, perhaps no foreign-owned CDMO has established more sites and services in the U.S. than WuXi. The assumption, then, is pricing differences with other CDMOs here should narrow (or disappear in time).

Where Do We Stand?

To be clear, no legislation has been passed yet.

In the meantime (and in my opinion), WuXi has handled this challenge with public-relations aplomp.

I’m not here to promote one side or the other in geopolitical terms, but allow me to quote directly from the WuXi response of February 3:

“While the U.S. government has determined that certain companies do pose such a risk to the United States and has imposed sanctions against them, WuXi AppTec has never been subject to any such determination or sanction. We welcome regulatory oversight of our industry, including the proposed evaluation of biotech companies in the recent legislation. But we strongly object to blanket allegations and preemptive actions against our company without due process.”

“WuXi AppTec has a strong track record of upholding the highest intellectual property, data and privacy protection standards, as well as maintaining the trust of our customers …

“As deliberations on this legislation continue, we are actively correcting the unfounded and misleading claims about our company. We are confident that upon considering the facts, U.S. lawmakers will understand that WuXi AppTec does not in any way pose a national security risk to any country. Instead, we serve as a valued contributor to the pharmaceutical and life sciences industries.”

Yes, let’s have claims in this legistlation fully laid out for us – particulalry the purported direct association with China’s People’s Liberation Army.

For now, how should we approach this turn of events?

• Is WuXi, so to speak, one of us?

That is, a valued part of the global drug and therapy outsourcing industry? A partner to numerous U.S.-based biopharma organizations? A component of our ecosystem?

• Is the organization a continuing threat to other CDMOs without, as has been documented, China-government financial support?

• Do we believe WuXi is a combatant in a global war for control (or theft) of data, privacy, and purveyor of unfair market and trade policies?

This is a tough situation, especially as I started out, for those of us who very much see the current China Communist Party as an undesirable part of the world.

All of us, though, should go well beyond the reticent feeling that this is about a bunch of U.S. politicians pretending to do something about China in an election year.

So the final question:

• How indeed, should the biopharma industry respond?