Biosecure Act Impacts Genomics Researchers Amidst Strained US-China Relations
Jun 18, 2024 | Huanjia Zhang | GenomeWeb
NEW YORK – Corbin Jones wanted a Complete Genomics sequencer for his lab last fall. A faculty director of the Integrated Genomics Cores at the University of North Carolina at Chapel Hill, Jones considered the Chinese company’s DNBSEQ-T7 platform a good fit for the center because he believed it to be “faster, cheaper, and more flexible” than other sequencers on the market.
It took some convincing to get his university’s administrators on board. “Because of the concerns due to the US-China relations and tariffs, there was a lot of reticence in the UNC leadership to do this,” Jones said. The proposal wound its way through the institution and in January, the contract was on its way to final approval.
That same month, the Biosecure Act dropped. Introduced by the House Select Committee on Strategic Competition between the US and the Chinese Communist Party (CCP), the bill identified BGI Group, MGI Tech, and MGI’s US subsidiary Complete Genomics, along with WuXi AppTec, as so-called “foreign adversary biotech companies of US national security concern,” aiming to cut off federal funding for their services or products.
“That was exactly what everyone was afraid of, but it was too late [to withdraw the order],” Jones said. “UNC is a large, slow bureaucracy, and once it gets going, you are not going to stop [it].” Eventually, the deal went through, and the sequencer, which is being leased, is up and running in his lab.
The Biosecure Act has since gained significant momentum in Congress, and while it remains to be seen if or when it will be passed into law, it signifies further decoupling of the US and China, with potential downstream effects on genomics research.
‘It doesn’t make sense’
Since its inception, the Biosecure Act has garnered support from Democrats and Republicans and was bolstered by corresponding legislation from the Senate. In May, a new version of the bill was introduced, extending the deadline to 2032 for existing customers to dissociate from China-related companies listed in the bill. In addition, WuXi Biologics was added to the list.
The updated bill was subsequently marked up by the House Committee on Oversight and Accountability, which voted in late May to advance the legislation. Last week, the House Rules Committee left the bill out of its final list of amendments to be considered for the National Defense Authorization Act for fiscal year 2025, but there are other ways it could become law.
Some researchers are not convinced the bill’s inclusion of hardware companies like MGI Tech and Complete Genomics furthers its stated goal of protecting US data security. Unlike service providers on the list, which directly interact with customers’ samples or data, they do not believe sequencing platforms pose security concerns, regardless of their Chinese ties. In addition, Complete Genomics originally hailed from the US — BGI-Shenzhen acquired the Californian company in 2013.
“It doesn’t make sense to me,” said Michael Snyder, chair of genetics at Stanford University School of Medicine and director of the Stanford Center for Genomics and Personalized Medicine, which currently operates a Complete Genomics DNBSEQ-T7 platform. He pointed out that the instrument is designed to run locally, giving users full autonomy over the data.
Jones concurred. “I can understand reservations about sending data somewhere where you do not fully control what happens to it,” he said, but such concerns do not apply to Complete Genomics’ sequencing hardware.
“CCP-controlled companies leverage genomic data for surveillance and other malign purposes, and they would certainly do so again in the event of a conflict,” John Moolenaar (R-MI), chairman of the select committee that conceived the bill, wrote in an email response to a an interview request. “The Biosecure Act would limit our dependency on our foremost adversary as it grows increasingly hostile to America and our allies.”
The select committee on the CCP did not offer further explanation regarding the inclusion of equipment manufacturers. Other sponsors of the bill did not respond to interview requests.
Limiting competition
From the get-go, Complete Genomics has been adamant that it “does not belong” in the Biosecure Act, as it is “a US-based instrument manufacturer, does not collect or have access to genetic patient data, and complies with all applicable data privacy laws.“
The company claims that the bill stems at least in part from Illumina’s “effort to eliminate competition,” especially after it was revealed that Illumina spent close to $500,000 during the first quarter of 2024 on lobbying for the Biosecure Act. BGI, MGI Tech, and Complete Genomics, meanwhile, launched their own lobbying campaign against the act and other bills, spending $200,000 in Q1 on these efforts.
Researchers, especially academic investigators who largely rely on government funding, feel that the Biosecure Act will hamper competition in the NGS market, which has long been dominated by Illumina but has recently seen new players, including Element Biosciences, Ultima Genomics, Singular Genomics, and MGI, which is doing business in the US through Complete Genomics.
“Illumina has been overcharging for a long time because it had a monopoly,” said Snyder, adding that his lab chose the T7 platform over others mainly because of the lower instrument price and operating costs. If the Biosecure Act passes, he said, his lab will have to shift projects supported by the National Institutes of Health or other federal funding to alternative platforms and sustain the T7 sequencer with local or private grants. “Had we known [the Biosecure Act] was coming, we could have been maybe a little more careful [in making the purchase decision],” he said. “Would we have still done it? Not sure.”
“Because of the Biosecure Act, we will lose a valuable tool in our toolkit,” said UNC’s Jones. Since his team was wary from the beginning of the potential fallout from a sequencer from a Chinese company, it opted to lease the T7 platform instead of purchasing it. “This is a large, high-dollar system. We would have to have an exit strategy,” he noted. “We don’t want to [abandon the sequencer] because we have invested time, money, and energy to making sure [the T7] is going to be a successful platform here.”
Complete Genomics is “trying very hard to market [their instruments], but if this big hurdle comes out, it will significantly limit their marketing,” said Xiaoling Xuei, technical director of Indiana University School of Medicine’s Center for Medical Genomics, whose lab has been considering adopting a Complete Genomics platform to perform Stereo-seq, a spatial analysis technology originally developed by BGI researchers. In light of the Biosecure Act, she said, her team will “definitely take at least one step back” before committing to a Complete Genomics instrument.
“We should of course protect intellectual property, but I also want to ensure competition and innovation on the market,” Christopher Mason, a genomics expert at Weill Cornell Medicine, wrote in an email. “As the bill gets finalized, I’d want to make sure it strikes that balance.” His lab has also evaluated a Complete Genomics platform for the Stereo-Seq technology, but he declined to say whether the legislation has affected his purchasing decision.
A number of researchers also say the bill is not transparent about the rationale for including Complete Genomics. “You can put out a bill, but don’t specify [companies] unless you have good evidence of their violations,” Xuei said.
“In the field, a lot of people don’t want to touch Chinese products because of fear,” said Xinkun Wang, director of the NUSeq Core Facility at Northwestern University. “I think the thing to avoid here is to create the kind of fear and atmosphere to make people try to avoid it altogether.”
Wang has been operating a Complete Genomics DNBSEQ-G400 platform for over a year and said he does not believe it poses security concerns. “Country of origin definitely shouldn’t have any rule in terms of deciding something,” he added. “I don’t think that is the American way of doing things.”
Across the globe in China, industry observers were caught off guard by the language of the Biosecure Act. “What we found quite interesting was that [the lawmakers] just pointed out certain companies directly without giving a framework of what kinds of companies they would like to ban in America,” said Kai Zhan, a former Chinese diplomat and a partner at Yuanda China Law Offices who specializes in cross-border international trade and international regulatory compliance. The bill appears to have “a lot of gray areas, just like the Chinese government,” he added.
Ripple effects
It remains to be seen how much the Biosecure Act might impact US genomics research, given that MGI and Complete Genomics only returned to the US market at the beginning of 2023 and still need to establish themselves.
Canaccord Genuity Managing Director and Senior Equity Research Analyst Kyle Mikson said that unlike WuXi, which has a “stronghold” in the US contract development and manufacturing organization (CDMO) market, he has only seen “soft adoption” of Complete Genomics platforms so far.
“I have not considered [acquiring] Complete Genomics technology,” Brewster Kingham, director of the DNA Sequencing and Genotyping Center at the University of Delaware, wrote in an email. He said it is unclear how the company’s platforms would benefit his group’s research compared to those of competitors, such as Illumina or Element. Regardless, the Biosecure Act would “certainly impact” his decision to buy products from a China-based company, he noted.
It is also unclear how the Biosecure Act would affect Complete Genomics’ industry clients, who do not rely heavily on government funding. Several companies known to operate Complete Genomics sequencers, including AccuraGen and Praxis Genomics, did not respond to a request for comment.
Complete Genomics declined to disclose its installed base of sequencing platforms in the US, but its revenues in the US last year were low. According to MGI Tech’s 2023 full-year report, overseas revenues accounted for roughly 35 percent of total revenues, which were RMB 2.87 billion ($395.7 million), and US revenues made up about 5 percent of overseas revenues, translating to approximately $7 million.
The report also noted that although there are still “many uncertainties” regarding the passage of the Biosecure Act, the bill has already negatively impacted MGI’s businesses in the US and beyond, leading to “delayed or canceled partnerships.”
“It is definitely hitting some of the sales opportunities and slowing things down,” said Rob Tarbox, Complete Genomics’ VP of product and marketing. “From talking to the sales team, [there are] very few situations where this doesn’t come up in some way or shape.” He declined to say how many orders were delayed or canceled because of the Biosecure Act, noting that the exact reasons for cancelations or postponements often remain unknown.
Likewise, it is unclear how the Biosecure Act is affecting the US business of BGI Genomics, which offers research services to academic and corporate customers. BGI Shenzhen, also known as BGI Group and the holding company of BGI Genomics, previously stated that the Biosecure Act “will succeed only in driving BGI out of the US and will not accomplish its stated goal” of achieving genomic data security for the US. BGI Genomics and BGI Group declined to comment on whether they had observed drops in contracts or customers due to the bill.
Besides affecting CDMOs and genomics firms named in the Biosecure Act, the bill may also have ripple effects on other biotech segments, such as synthetic biology.
In a statement at the end of May, the select committee on the CCP said it requested information from the FBI and Director of National Intelligence about potential CCP ties of GenScript, a Chinese competitor of Twist Biosciences, “to determine the extent of CCP influence and control over their operations.”
Though GenScript has not been included in the Biosecure Act, Barclays analyst Luke Sergott wrote in a June research note that he sees the probe “as a potential share gain opportunity for Twist and other US-based synthetic DNA suppliers.”
“Due to perceived risk or negative perception,” synthetic DNA customers will likely move away from China-based companies, said Steven Mah, managing director of equity research at TD Cowen. Unlike pharma CDMOs, which can be difficult to switch, it is “very easy” to change suppliers of synthetic DNA, as there is ample domestic production capacity, he explained.
Meanwhile, in China, it appears the Biosecure Act has touched a nerve for some shareholders of the affected companies. “Investors really care about this,” said Zhan, the Chinese lawyer. “Some investors asked me to read the draft to them word by word and asked the definition of every word,” he said, adding that certain Chinese investors have huge stakes in the publicly traded companies listed in the Biosecure Act.
Yun Liu, a genomic scientist at an eastern China-based biotech firm that he declined to disclose, said that although the Biosecure Act has not had a direct impact on genomic researchers in China, they do worry it could further tear the two countries apart. “Chinese researchers are more concerned about whether this bill will lead to a deeper rift in US-China science collaborations,” Liu said. “If the gap between the two countries widens, it will inevitably slow down the progress of scientific research.”
The Chinese Embassy and the Beijing Institute of Genomics, which is part of the Chinese Academy of Sciences, did not respond to a request for comment.
‘Hot potato’
Although the Biosecure Act could affect the biotech industry profoundly, stakeholders appear reluctant to express their thoughts publicly.
Stephane Budel, CEO and cofounder of DeciBio, a consulting firm for the precision medicine industry, declined an interview request, saying the topic is “a bit of a hot potato that we (at DeciBio) should likely stay away from for reasons I can’t really get into.”
The Biotechnology Innovation Organization (BIO), which bills itself as “the world’s largest advocacy association” of the biotechnology industry, did not respond to repeated interview requests. According to BIO’s first-quarter lobbying disclosure, the organization coordinated advocacy work with WuXiAppTec, a former member, as well as other BIO members to seek the “removal of the list of entities specifically named” in the Biosecure Act. Additionally, BIO disclosed that it “advocated on behalf of the biotech industry to avoid supply chain disruptions” resulting from the bill “that would interrupt treatments and cures for patients.”
BIO has since flip-flopped, however, stating recently that it “applauds” and “supports” the Biosecure Act. In a March statement, BIO also said that WuXi AppTec “proactively ended its membership” with the organization.
During Thermo Fisher Scientific’s Q1 earnings call, CEO Marc Casper, who is also chair of the US-China Business Council, told investors that the company is “likely to be a long-term beneficiary” of customers rethinking their partnerships with Chinese-based companies. Thermo Fisher declined several interview requests, and the US-China Business Council did not respond to repeated requests for comment.
Likewise, genomics professional societies and government agencies have mostly stayed silent on the Biosecure Act so far. The American College of Medical Genetics and Genomics, the American Society of Human Genetics, and the National Human Genome Research Institute all declined to comment or did not respond to interview requests.
Building walls
Not long after the introduction of the Biosecure Act, the White House issued an executive order to “protect Americans’ sensitive personal data from exploitation by countries of concern,” including China. Including genomic data in a category of “Americans’ most personal and sensitive information,” the White House tasked the Department of Justice to issue rules and regulations under the executive order, which are still forthcoming. The DOJ did not respond to requests for comment on those regulations.
For many, both the Biosecure Act and the White House executive order, against the backdrop of other anti-China policies such as the ban of Huawei and TikTok, manifest the souring US-China relations in recent years.
“There seems to be a general trend towards anti-China rhetoric,” said Snyder. “I think it has a lot of my Asian colleagues quite concerned. It has me concerned.”
Tensions between China and America have been escalating for many years since the Trump administration, said Zhan. “So far, I don’t think there are any major changes that can be seen in the future [indicating] that China and America will go back to their honeymoon.”
“Prior to these executive actions, US companies had faced few restrictions on how they shared data abroad,” the Global Alliance for Genomics and Health (GA4GH) said in an email statement. While the White House executive order and the Biosecure Act “could severely impact US companies’ and research institutes’ ability to contract with biotechnology entities in foreign countries deemed to be ‘of concern’, it is too early to determine the full impact these acts will have on data sharing from and to the States,” GA4GH wrote.
China, for its part, has prohibited foreign entities from collecting genetic material within its borders and has restricted cross-border genomic data flow for many years. “The Chinese law has had a big impact on research — it’s very difficult for foreign entities to use Chinese samples to do research and to get the data,” said Mao Mao, founder and CEO of cancer early detection firm SeekIn, former CSO of BGI Genomics, and a former VP at WuXi AppTec. “We absolutely need to work together across borders, but all these regulations, in my view, are not good for humanity and not good for scientific research.”
“As scientists, I think we tend to not be very protectionist,” Snyder agreed. “I don’t like the idea of putting these walls up.”