In new letter to Defense Department, WuXi AppTec refutes claim of secret data transfer

Of all the allegations thrown at WuXi AppTec during an ongoing U.S. biosecurity crackdown, a recent intelligence report that the company had transferred an American client’s intellectual property to Beijing without consent was one of the most damning. Facing potential sanctions, the contract research and manufacturing giant is now rebutting the claim in a new letter to the U.S. Department of Defense (DOD).

WuXi Apptec’s leadership is “not aware of, would never approve, does not condone, and has a zero-tolerance policy against any attempt to mishandle or transfer a customer’s intellectual property (IP) to any unauthorized party,” the company said in a recent letter penned by co-CEO Steve Yang and its U.S. and European president Richard Connell, Ph.D.

The WuXi executives addressed the May 3 letter to the DOD’s assistant secretary of defense for industrial base policy, Laura D. Taylor-Kale, Ph.D.

The letter offers a direct comment on a March Reuters report that claimed U.S. intelligence officials in February warned senators about the alleged data transfer. After the briefing, the Senate’s homeland security committee in early March voted to send the BIOSECURE Act—which would effectively block WuXi from the U.S. market—to the Senate floor.

When the report first came out, WuXi said it was not aware of the alleged incident. Because the name of the client and other details were kept classified, the company has not been able to address the specific event directly.  

In the letter to Taylor-Kale, WuXi AppTec is encouraging the DOD to conduct its own analysis. The Chinese CRO said it operates in accordance with all U.S. data privacy and IP guidelines and has implemented “multiple advanced physical and information technology controls” to prevent unauthorized transfers. The company also touted its 100% pass rate during the 748 quality audits and inspections by customers, regulatory authorities and independent third parties in 2023.

WuXi AppTec’s May 3 letter to the DOD followed a previous outreach from the company to the agency in February. The communications come as the DOD is required by the fiscal year 2024 National Defense Authorization Act to identify any biotech entities that could be viewed as related to the Chinese military.

Such companies would be added to what’s known as the “1260H list” and would be forbidden from providing the DOD with goods or services, either directly or indirectly.

WuXi’s possibility of being targeted by the DOD rose in February, when several lawmakers behind the BIOSECURE Act asked that the DOD, plus the Department of Commerce and the Department of the Treasury, add WuXi AppTec and its sister CDMO WuXi Biologics to the 1260H list.

“[O]ur company does not meet either of the designation criteria: it is neither owned nor controlled by the People’s Liberation Army or any agent of the Chinese Communist Party, nor is it a ‘military-civil fusion contributor to the Chinese defense industrial base,’” the WuXi AppTec execs said in the new letter.

WuXi is not controlled by or have financial ties to the Chinese military, the company said, pointing also to the fact that the majority of its directors and senior management team are U.S. citizens. Military staffers may invest in the company because it is publicly traded. But none of WuXi’s 500,000 individual and institutional investors have access to non-public information or have the ability to influence management decisions, the letter contended.

WuXi’s employees are not allowed to use or share their work performed for customers with people outside the company, including military officials or institutions, the execs added.

One of the factors that originally spurred the BIOSECURE Act was a concern that China could get ahold of Americans’ genomic data through gene sequencing and biotech service providers.

Ironically, as WuXi AppTec noted, the company is considered a foreign-invested enterprise under Chinese law and is therefore prohibited from performing human genomic sequencing and data collection services.

Back in 2015, WuXi AppTec’s then parent company acquired what once became WuXi NextCODE, which, operating separately from WuXi AppTec, conducted population-based genomic research. But WuXi AppTec said it never had access to NextCODE and that it has no connection to its operations. WuXi’s parent shed NextCODE in 2020, and the succeeding owner has ceased operations after selling that business in 2021, according to WuXi.

Before NextCODE’s divestiture, WuXi AppTec in 2016 signed a cloud platform deal with Chinese tech giant Huawei involving NextCODE’s genomics data and expertise. But no specific collaboration happened under that agreement, which has since then elapsed, according to WuXi. Huawei is a 1260H company and one of the protagonists in the U.S.-China national security battle. 

Although the 1260H list poses a more imminent threat—the DOD is expected to provide an update in mid-June—the BIOSECURE Act still represents a bigger business problem for WuXi AppTec. While the 1260H governs DOD contracts, the BIOSECURE Act would block any U.S. federal funding to companies that use equipment or services from a list of target providers, which now includes both WuXi AppTec and WuXi Biologics, according to an amendment to the House version of the bill.  

Still, all of WuXi’s outreach may be falling on deaf ears. Despite public defenses offered by both WuXi firms, the advancement of the BIOSECURE Act has shown no signs of slowing down. The House Oversight Committee is scheduled to mark up the bill this Wednesday.