Chinese biotechs cited by name in the BIOSECURE Act—which would restrict their U.S. activity on national security grounds—saw their stocks grow this past week after a setback that left the bill’s future up in the air. But the Chinese companies could not maintain their momentum by the time Friday rolled around.
The House of Representatives’ Committee on Rules on June 11 excluded the BIOSECURE Act from among some 350 proposed amendments added for consideration to the annual defense authorization bill being hammered out in Congress for federal Fiscal Year 2025, which begins October 1 of this year.
Reasons for the exclusion have not been made public, though published reports said Republican leaders were intent on pruning the more than 1,300 amendments that House members proposed before taking the bill to the floor for a vote.
The omission from the FY 2025 National Defense Authorization Act (NDAA) left sponsors of the BIOSECURE Act uncertain about the future of the measure despite its winning bipartisan support from Republicans and Democrats in both the House and U.S. Senate.
All that uncertainty is good news for the five Chinese biotechs companies singled out in the BIOSECURE Act. The bill—known as H.R. 7085 in the House and S. 3558 in the Senate—would forbid the awarding of federal contracts, including procurement of drugs for Medicare and Medicaid, to “foreign adversary biotech companies of U.S. national security concern.”
Singled out in the BIOSECURE Act are:
- BGI Genomics (300676.SZ), a subsidiary of BGI Group that provides clinical molecular diagnostic solutions and high-throughput sequencing (NGS) research services.
- MGI Tech (688114.SS), a developer of high throughput sequencers and other core lab tools and technology, and its U.S. subsidiary Complete Genomics, which develops genomic sequencing tools for research, healthcare, and industrial applications.
- WuXi AppTec (2359.HK), which describes itself as “provid(ing) R&D & manufacturing services enabling companies in the pharmaceutical & biotech industries worldwide to advance discoveries.”
- WuXi Biologics (2269.HK), which calls itself “a global open-access biologics technology platform offering end-to-end solutions to empower organizations to discover, develop and manufacture biologics from concept to commercial manufacturing.”
WuXi AppTec spun off WuXi Biologics in 2017; both are now separate companies.
One-day surge
On Wednesday, WuXi Biologics enjoyed its largest one-day stock surge in 19 months when its shares on the Stock Exchange of Hong Kong jumped 14%, from HKD 10.98 ($1.41) to HKD 12.54 ($1.61). Shares of WuXi AppTec, also traded on the Hong Kong exchange, rose 8.5%, from HKD 33.15 ($4.24) to HKD 35.95 ($4.35). On the Shanghai Stock Exchange, MGI Tech increased 6%, from CNY 49.64 ($6.84) to CNY 52.80 ($7.28), while BGI Genomics shares on the Shenzhen Stock Exchange inched up 0.3%, from CNY 38.33 ($5.28) to CNY 38.43 ($5.30).
But between Wednesday and Friday, the companies had given back all or most of their gains. WuXi AppTec showed the biggest decrease, sinking 6.5% to HKD 33.60 ($4.30), followed closely by WuXi Biologics, which dropped 6% to HKD 11.74 ($1.50). MGI fell 2% to CNY 51.59 ($7.11), while BGI dipped 1.6% to CNY 37.82 ($5.21).
The about-face for the Chinese biotechs appears to reflect investors’ continued confidence that the BIOSECURE Act could still eventually pass both chambers of Congress given lopsided majorities for the measure in committee votes, reflecting its broad bipartisan support.
That conclusion aligns with the one reached by two analysts in TD Cowen’s Washington Research Group soon after the House Rules Committee setback.
“We are surprised the strongly supported bipartisan measure was not included by the House, but continue to believe it will be enacted given the strong committee votes in both the House and the Senate,” Rick Weissenstein, a managing director focused on healthcare services and pharmaceutical policy, and Roman Schweizer, a managing director focused on aerospace and defense, wrote June 11 in a policy note.
“The BIOSECURE Act could still become law, but it faces a more onerous path,” Weissenstein and Schweizer added.
Two paths to passage
The two analysts outlined two potential paths for the BIOSECURE Act to pass Congress. The Senate could simply add the bill to its list of amendments for consideration to its version of the NDAA. This past week, the Senate Armed Services Committee began the “markup” or detailed drafting of the NDAA bill by the full committee, with subcommittees expected to take up markup work in the near future. [Those dates and times had not been announced at deadline.]
The Senate version of the BIOSECURE Act, introduced by Sen. Gary Peters (D-MI), cleared one hurdle in March when the Senate Committee on Homeland Security and Governmental Affairs voted 11–1 to report the bill out of committee—another sign of bipartisan support. Only Sen. Rand Paul (R-KY) voted against the measure, citing anticompetitive concerns (“By banning certain companies, we’re advantaging certain other companies”), and what he said was the need for further study on whether the bill would trigger supply chain disruptions that ultimately raise drug costs for consumers.
The other path to passing Congress, according to Weissenstein and Schweizer, would be for the BIOSECURE Act to be considered for votes as a standalone bill.
The original January version of the bill was introduced in the House by the then-Republican Chairman and Democratic ranking member of the House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party, Mike Gallagher (R-WI) and Raja Krishnamoorthi (D-IL), respectively.
On May 10, Krishnamoorthi and Rep. Brad Wenstrup, DPM (R-OH), who is Chairman of the House Select Committee on the Coronavirus Pandemic, introduced a revised version of the BIOSECURE Act in the House. The revised version differed from the original in two key respects: It added WuXi Biologics to the list of companies cited by the bill, and allowed U.S. biotechs to continue doing business with Chinese companies cited in the bill for seven years, through 2032.
Wenstrup emerged as the bill’s House sponsor after Gallagher vacated his House seat and departed Congress on April 19, in order to avoid a party primary he was reported to be facing this year after he was one of three House Republicans to vote against impeaching U.S. Homeland Secretary Alejandro Mayorkas in February.
Tempus AI goes public, rises 9%; Tellix withdraws U.S. IPO
Tempus AI (TEM) shares rose about 9% Friday, to $40.25 from the initial public offering (IPO) price of $37, as the artificial intelligence (AI)-based precision medicine company showed once again how attractive the technology is to investors.
Tempus sold 11.1 million shares of its Class A common stock at the highest price in its $35–37 price range, raising $410.7 million in gross proceeds. Tempus is projected to have made at least $371.4 million in net proceeds once underwriting discounts, commissions, and other offering expenses have been subtracted.
At $37 a share, the company raised $10.3 million more than the $361.1 million previously forecast based on a $36 price, according to Amendment No. 2 to its Form S-1 Registration Statement that Tempus filed Thursday with the U.S. Securities and Exchange Commission.
Tempus spelled out two uses for its net proceeds. The company plans to spend approximately $76.6 million from the IPO (up from $74.5 million at the $36-a-share price) to pay federal and state tax withholding and remittance obligations related to its planned settlement of restricted stock unit (RSU) awards to top executives. Tempus also plans to pay down all or part of the $265.8 million in gross principal that the company has outstanding under its Term Loan Facility.
Morgan Stanley, J.P. Morgan, and Allen & Company are acting as lead book-running managers for the proposed offering. BofA Securities and TD Cowen are serving as additional book-running managers, while Stifel, William Blair, Loop Capital Markets, and Needham & Co. are acting as co-managers for the proposed offering.
Tempus’ shares had risen as high as $43.88 at 12:23 p.m. ET, which would have given investors a 19% gain.
Tempus founder and CEO Eric Lefkofsky told Bloomberg News he believed investors’ response to its IPO “is a function of people realizing, for the first time ever, there are all these incredible background technologies, including generative AI and large language models that make it so that we can finally bring technology to health care.”
“It’s kind of sad that health care hasn’t adopted technologies as fast as other industries, especially when so many patients are suffering on the other end,” said Lefkofsky, a serial entrepreneur who co-founded AI-based drug developer Pathos.AI, Groupon, and several other companies.
Tempus accounted for about half of the $853 million raised by this past week’s IPOs. That number would have cracked $1 billion had Tellix Pharmaceutical (TLX.AU), which is listed on the Australian Stock Exchange (ASX), proceeded with earlier plans for a $202 million U.S. IPO.
Tellix had filed with the SEC to offer 17 million American Depositary Shares (ADSs) at $11.87, the as-converted June 4 close of its shares on the ASX. Instead, the company withdrew the offering.
“Given the proposed Nasdaq listing was not predicated on the need to raise capital, Telix’s management and Board of Directors have decided not to move forward with the transaction at the terms provided under current market conditions,” Tellix said in a statement.
Tellix also contended that proposed discounts to U.S. IPO investors clashed with its duty to existing shareholders in Australia.
Leaders and laggards
- Avidity Biosciences (RNA) shares jumped 38% over two days, from $28.92 to $38.36 on Wednesday and $39.96 on Thursday, after the company announced positive initial data from the Phase I/II FORTITUDE™ trial (NCT05747924) showing that AOC 1020 (now renamed delpacibart braxlosiran or del-brax) generated “unprecedented and consistent” reductions of greater than 50% in double homeobox 4 (DUX4) regulated gene panels (2 mg/kg at four months), trends of functional improvement, and favorable safety and tolerability in people living with facioscapulohumeral muscular dystrophy (FSHD). Avidity said it plans to accelerate the start of registrational cohorts in FORTITUDE as a result. Del-brax is the first therapy candidate designed to treat the underlying cause of FSHD, the abnormal expression of DUX4. Avidiy cashed in through an underwritten public offering of 10.55 million shares at $38 a share, generating $400.9 million in gross proceeds.
- Kyverna Therapeutics (KYTX) shares tumbled 34% from $14.44 to $9.53 on Friday, despite researchers sharing positive data for its lead autologous, fully human anti-CD19 chimeric antigen receptor T-cell (CAR T) immunotherapy candidate KYV-101 at the Annual European Congress of Rheumatology (EULAR 2024) conference in Vienna. Kyverna presented data from a 50-patient cohort which supported the differentiated safety profile of the CAR in various indications, including a 30-patient data set that spanned >28 day follow-up in various autoimmune disease patients with early efficacy data. A 12-month follow-up of the first patient treated with KYV-101 for myasthenia gravis was also presented. But investors appeared to overlook the good news, as 28% of available Kyverna shares are being sold short according to Benzinga. Following the selloff, Kyverna’s share price has plunged 72% since the company launched its initial public offering (IPO) on February 8.
