Opinion: As More Companies Are Targeted by BIOSECURE Act, Investor Relations Crisis Brews

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Pictured: Collage of a dragon, congress, and money/Taylor Tieden for BioSpace

As the fate of the BIOSECURE Act hangs in the balance, a U.S. House of Representatives committee on China asked the FBI for a briefing on contract development and manufacturing organization (CDMO) GenScript Biotech—along with subsidiaries Bestzyme, Legend Biotech and ProBio—to determine if the Chinese Communist Party influences their operations.

In a May 30 letter to the FBI and the U.S. Office of the Director of National Intelligence, the committee chair and ranking member of the House Select Committee on these matters said GenScript’s work with U.S. companies and the U.S. government raises concerns about the intellectual property of those firms and could help improve China’s biotech capabilities.

GenScript was founded in 2002 in New Jersey. In 2004, it launched a research and production base in Nanjing, China. In 2015, GenScript went public on the Hong Kong Stock Exchange. Co-founder Frank Zhang earned a PhD from Duke University before heading to New Jersey to work as a lead researcher at Schering-Plough, which later merged with Merck.

With this latest development, there’s greater potential for a PR crisis to expand into an investor relations (IR) crisis. After all, GenScript along with WuXi Biologics and WuXi AppTec, already named in the BIOSECURE Act, comprise a combined 12.87% of the Hang Seng Hong Kong–listed Biotech Index, which includes the 50 largest biotech companies traded on the Hong Kong Exchange. This index fell 29.17% in the past year, and these losses are likely to accelerate if GenScript and its subsidiaries get added to the BIOSECURE Act, as this could lead investors, especially institutional investors, to sell GenScript and other biotech stocks on both the Chinese and U.S. exchanges as part of risk management mandates.

Though PR professionals at these companies have no control over such mandates, they are at a critical juncture—they must now communicate the right messages to key audiences. Silence or delayed responses could exacerbate PR and IR crises, leading to further erosion of stakeholder and investor confidence.

Hang Seng Hong Kong-Listed Biotech Index Performance

Hong Kong Biotech Index/Nicole Bean, BioSpace

Let the Truth Speak and Don’t Remain Silent

For the first time, a medical product manufacturer was flagged by the House Select Committee as a possible cause for concern. In addition to GenScript, Legend Biotech, Johnson & Johnson’s partner on the CAR-T therapy Carvykti, is listed in the committee’s letter to the FBI. BioCentury noted that “the letter explicitly expands the committee’s concerns from national security to commercial competitiveness.”

My interpretation of these points is that any China-based biotech that’s innovative and doing reasonably well in the U.S. may be the select committee’s next target. This understandably makes PR professionals from the U.S. biopharma industry and China-based biotechs nervous. Neither party wants to see their businesses or suppliers undesirably affected by such legislative maneuvers. On June 6, the first trading day after the House committee’s letter was made public, GenScipt’s stock fell by nearly 20 percent.

Given the nationalistic sentiments at play, the U.S. biopharma industry is likely to play its PR cards in a low-key manner to influence lawmakers and key audiences through industry associations. This approach would be similar to how BIO surveyed its members to propose eight years as a “reasonable timeframe” for U.S. companies to sever ties with Chinese biomanufacturing. But what key messages should PR professionals prioritize through these strategic channels?

Firstly, point out that innovation does not happen in a vacuum. Innovative Chinese biotechs are also boosting their U.S. partners’ commercial competitiveness. The example, the Financial Times reported that in May 2024, four life science investors, including Bain Capital Life Sciences, the U.S. buyout group’s pharma arm, invested $110 million upfront into a new biotechnology startup that licensed a portfolio of weight loss medicines from Shanghai-listed drugmaker Jiangsu Hengrui Pharmaceuticals.

Secondly, highlight that internationalization is a hedge against market sentiments and inefficiencies. According to the Financial Times, Chinese drugmakers are struggling to raise funds domestically for drug development and clinical trials during an ongoing stock market slump in the country, while the S&P 500 and Nasdaq are at near-record highs. Western pharmaceutical companies and investors invested a record $44.1 billion in licensing deals with their Chinese counterparts last year.

Lastly, Chinese biotechs should step up their international communications to reassure existing clients while signaling that these companies are committed to the global market throughout the unpredictable legislative process. The worst option is communications radio silence, which less-established players tend to adopt by default. Be warned that silence is not golden when uncertainty is likely to reign for the foreseeable future.

To conclude, I would like to rewrite a Naval tweet to fit this moment: Bad legislation is hard to predict. Good supply chains are hard to vary. And great PR minimizes potential disruption.

JX (Jaxon) Tan founded Momentum AI Communications, a boutique PR consultancy based in Singapore, with a mission to simplify science and spark engagement. He was previously based in China, where he led international communications for a leading biotech company and was head of content (APAC) for PR Newswire. Reach him on LinkedIn.

Editors note: This story has been updated to reflect yesterdays developments that the House Rules Committee will not discuss the BIOSECURE Act this week.

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