China's WuXi AppTec shared US client's data with Beijing, US
intelligence officials told senators
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[March 28, 2024]
By Michael Martina, Michael Erman and Karen Freifeld
(Reuters) -U.S. intelligence officials in late February told senators
working on a biotech security bill that Chinese pharmaceutical firm WuXi
AppTec had transferred U.S. intellectual property to Beijing without
consent, according to two sources.
The U.S. government is concerned that certain Chinese biotech companies
are contributing technology or research and development for use by
China's military, and the proposed legislation would restrict U.S.
government funds going to those Chinese companies.
The classified briefing to about a dozen senators was led by the FBI,
the State Department and the Office of the Director of National
Intelligence. Those officials said that WuXi AppTec and other Chinese
entities had engaged in activity in the U.S. contrary to U.S. national
security interests, the sources said on condition of anonymity.
Among the agencies' concerns was information reflected in recent
intelligence reporting that WuXi AppTec transferred a U.S. client's
intellectual property to Chinese authorities without consent, the two
sources said.
The sources did not reveal the name of the client or the nature of the
information due to the sensitivity of the classified material.
They declined to comment further on the briefing's contents.
A WuXi AppTec spokesperson said: "We are not aware of any unauthorized
transfers by WuXi AppTec of any U.S. client's data or intellectual
property to China. Safeguarding our customers' information is of the
utmost importance to us, and we store it in keeping with their
direction."
WuXi AppTec "respects and fully complies" with the requirements of U.S.
federal and state authorities, the spokesperson said.
The FBI, the Office of the Director of National Intelligence and the
State Department declined to comment.
China's embassy in Washington said Congress' claims that WuXi AppTec
posed a national security threat were unwarranted.
"If anyone believes that WuXi AppTec or its related companies have
violated laws regarding intellectual property rights, they should
provide convincing evidence to support their claims," the embassy said.
After the Reuters story was published, Hong Kong listed Wuxi shares
pared earlier gains of nearly 5% to trade 1% higher, while
Shanghai-listed shares were up 0.4%.
The briefing came as the Senate's homeland security committee was
considering the proposed Prohibiting Foreign Access to American Genetic
Information Act of 2024 that could restrict business with Chinese
biotech companies on national security grounds.
A committee aide for Democratic Senator Gary Peters, who heads the
bipartisan homeland security committee, confirmed to Reuters that
lawmakers received a recent briefing "to discuss the underlying
biosecurity threats that the bill is trying to address so that members
were well informed."
On March 6, the committee approved the legislation, which could be
considered by the broader Senate. The offices of the other seven
Democratic and seven Republican senators on the committee declined to
comment or did not respond to Reuters about the briefing.
A similar bill introduced in the House alleged that WuXi AppTec and
certain other Chinese companies have links to China's military,
allegations the company has also rejected.
The Chinese companies have said the legislation contains false,
misleading and unfounded allegations.
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A sign outside a Wuxi AppTec facility is pictured, in San Diego,
U.S., March 25, 2024. REUTERS/Michael Erman/File Photo
WuXi AppTec's services range from conducting research and
development to making pharmaceutical raw materials and manufacturing
drugs. Its customers include large pharmaceutical companies and
small biotech firms.
About two-thirds of its sales last year came from the U.S. The
company's revenue has more than quadrupled from 2018 to 40.3 billion
yuan ($5.6 billion) in 2023.
News about the bills has driven WuXi AppTec's shares down about 36%
in Shanghai and about 54% in Hong Kong this year.
'BIOSECURITY THREATS'
The February briefing occurred days before the U.S. Senate Committee
on Homeland Security and Government Affairs voted to advance the
proposed bill.
The Biotechnology Innovation Organization, which lobbies for
companies in the sector, initially opposed the inclusion in the
legislation of WuXi AppTec and others.
But by mid-March, under pressure from U.S. lawmakers, BIO reversed
its opposition to the bill, citing U.S. national security, and said
its member WuXi AppTec had ended its ties to the lobby group.
Around the same time as the briefing, the Biden administration
unveiled an executive order barring genomic and other data transfers
to China over national security concerns.
The Office of the Director of National Intelligence warned in its
annual threat assessment in February that Beijing was trying to fast
track its science and technology development through IP theft and
other means for economic and military advantage.
BIO'S TURNABOUT
After the briefing, legislators or staff from both political parties
told BIO that they had received concerning information about WuXi
AppTec's relationship with the Chinese government, according to two
additional sources.
The substance of that information was not conveyed, the sources
said. But one of the people said U.S. lawmakers' concerns, as well
as new direction from BIO's recently appointed chief executive, John
Crowley, helped spur the group to part ways with WuXi AppTec.
BIO had backed the company as recently as February, when then BIO
CEO Rachel King wrote a letter to the Senate homeland security
committee urging it to reconsider the proposed legislation. A week
after Crowley took over as CEO, BIO withdrew its support for WuXi
AppTec and endorsed biosecurity legislation.
Crowley described BIO's turnabout to Reuters as "an evolution" and
said the group wanted to work with lawmakers on legislation and to
bring biomanufacturing back to the United States. The Senate
committee's vote on the bill and public pressure from the sponsor of
the House version, Representative Mike Gallagher, were among the
factors behind the decision, Crowley said.
"We can't let China be the biotech center of excellence," he said.
(Reporting by Michael Martina in Washington, and Michael Erman and
Karen Freifeld in New York; Editing by Caroline Humer, Matthew
Lewis, Daniel Wallis and Lisa Shumaker)
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