www.jpmorganmarkets.comAsia Pacific Equity Research25 February 2024China CXO Scope of the "Biosecure Act" could get narrower in the HouseHealthcareYang Huang AC(852) 2800 3812yang.huang@jpmorgan.comJ.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) LimitedDenise Yan, CFA(852) 2800 8195denise.yan@jpmorgan.comJ.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) LimitedDerek Choi, CPA(852) 2800-8744derek.c.choi@jpmorgan.comJ.P. Morgan Securities (Asia Pacific) Limited/ J.P. Morgan Broking (Hong Kong) LimitedHelen Zhu, CFA(86-21) 6106 6371helen.x.zhu@jpmorgan.comSAC Registration Number: S1730522030001J.P. Morgan Securities (China) Company LimitedSee page 2 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.Reuters reported that Mike Gallagher (R-WI), the Chairman of the House Select Committee on China and the representative who sponsored the “Biosecure Act”, made some remarks on the bill during his recent trip to Taiwan. Overall, we think his latest comments are marginally positive to the China CXO sector and we share our takeaways here. We continue to believe that the probability of the bill being passed into law in the current form remains low. The bill, even if passed, could be narrowed in scope judging by Mr. Gallagher’s latest comments. Mr. Gallagher stated that he is “cautiously optimistic that (they) can get something done” with the proposed legislation, but the scope may be “more narrowly tailored” without providing further details. However, he did explain that “the primary concern is BGI and the secondary is WuXi” in his view. Given the bill itself does not currently reflect this order of priority, we opine that his comment could potentially suggest that he might focus his efforts in restricting the former (BGI), especially when the current Congress will end in less than 11 months (on January 3, 2025). Mr. Gallagher has also indicated that he is not going to seek re-election. Thus, it appears reasonable to us that he is considering advancing a bill narrower in scope rather than trying to advance a broad bill that could be more challenging to pass. Overall, we view his comments as marginally positive for WuXi Apptec, WuXi Bio, WuXi XDC and the China CXO sector. However, if the revisions Mr. Gallagher makes to the bill result in a House version that is meaningfully different from the Senate version, a reconciliation will need to be conducted which could make it more difficult for the bill to be passed into law. In fact, ...
