Novartis 'actively' reviewing relationships with Chinese contractors amid US biosecurity crackdown: CFO

As the BIOSECURE Act threatens to upend relationships with Chinese contractors and western biopharma companies operating in the U.S., Novartis has elected not to adopt a “wait and see” attitude.

Novartis, like many drugmakers, has ties to Chinese firms in the manufacturing and contract research space, the Swiss pharma’s CFO, Harry Kirsch, said on a press call Tuesday during its first quarter financial results. Amid the threat of a looming biosecurity crackdown by the U.S. government against many of those Chinese biotechs, Novartis is now “actively” managing the situation, Kirsch said.

“So, by the time this comes into effect, we will have no exposure from our planning,” the CFO explained, adding that the situation will be “mitigated in a very reasonable timeframe.”

Kirsch went on to explain that the company is weighing changes to its contracting relationships with Chinese companies “so that we are fully aligned” with potential U.S. regulations.

Novartis’ decision to cut ties with certain Chinese contractors follows the House Select Committee on the Strategic Competition between the United States and the Chinese Communist Party’s unveiling of the BIOSECURE Act in January.

The bill, which is still subject to further review and modification before it potentially becomes law, aims to keep U.S. taxpayer dollars out of the hands of “foreign adversary biotech companies” that allegedly pose a national security concern.

The bill specifically targets CDMO giant WuXi AppTec, as well as Chinese genomics companies BGI Group, MGI and Complete Genomics.

While the BIOSECURE Act is already weighing on companies like WuXi, it has largely been unclear how other major pharmaceutical companies would react or be impacted.

The comments from Novartis’ Kirsch provide one of the first major examples of a big drugmaker actively working to navigate the potential legislation before it becomes law.

Meanwhile, AstraZeneca, for whom China is a major market, recently revealed plans to manufacture drugs for the U.S. and Chinese markets independently from one another.

“We have a very large supply chain, and we are organizing ourselves so that we can actually supply the United States and Europe independently,” AstraZeneca CEO Pascal Soriot said in an interview with Bloomberg last month. “And we also are building our presence here in China, so we can actually supply Chinese patients independently.”

Novartis, for its part, also has major ties to China. Last month, CEOs from multiple drugmakers, including Novartis chief Vas Narasimhan, came together in Beijing to express their companies’ interest in the country and offer advice for its healthcare industry.

Intellectual property and data protection were a common theme at the meeting, with Narasimhan urging China to refine its early resolution mechanisms for patent disputes to include more patent types. He also urged local authorities to accelerate the implementation of patent compensation for new drugs.

In December, Novartis announced plans to build a new radiotherapy production plant in China with an investment of more than 600 million Chinese yuan ($84.6 million). The company also boasts radioligand manufacturing facilities in countries like Italy, Spain and the U.S.

The BIOSECURE Act has had a ripple effect in the U.S. Several weeks ago, trade group the Biotechnology Industry Organization (BIO) said it was taking “important steps” to support U.S. national security by endorsing the bill.

"Our adversaries abroad have stated that they intend to become the biotechnology center of excellence in the world," BIO CEO John Crowley said in a statement. "America and our allies cannot let this happen."

At the same time, former member WuXi AppTec “proactively ended its membership” with the lobbying organization, according to a March release from BIO.

A little less than a month after BIO put out its BIOSECURE statement, the group’s lobbying head, Nick Shipley, exited the organization, BIO confirmed at the time.