Korean genomics companies are expecting earnings growth following the passage of the US National Defense Authorization Act (NDAA), which includes the Biosecure Act aimed at blocking transactions with Chinese biotech firms.
Major Chinese genomics companies and related equipment makers are already listed on the US Department of Defense's "Chinese Military Companies (1260H)" list, and American public opinion has grown increasingly sensitive about genetic data leaks.
The contract development and manufacturing organization (CDMO) sector is also expected to benefit, though it has not yet been specifically named on the 1260H list.
According to industry sources on January 21, the US Office of Management and Budget (OMB) is set to designate and publish a list of "biotechnology companies of concern" within one year. Once designated under the Biosecure Act, these companies will be barred from transactions with US government agencies. Private companies that do business with or receive subsidies from US government agencies will also face disadvantages in procurement, contracts, loans and subsidies if they transact with companies of concern.
Industry observers note that the 1260H list released by the US Department of Defense already includes BGI, a Chinese genomics analysis service provider, and equipment manufacturer MGI Tech. The NDAA contains provisions to sanction companies on the 1260H list.
BGI is a genomics analysis company headquartered in China. Leveraging price competitiveness, it has sold genetic analysis data, cancer testing, prenatal screening and infectious disease diagnostic services in the United States. Its subsidiary MGI manufactures and supplies the necessary equipment.
"The prices were so low that most research facilities and universities receiving US government subsidies have been doing business with BGI," an industry official said. "They will need to find alternative suppliers within a few years."
The Korean biotech industry is pinning its hopes on this demand. Particular attention is being paid to companies that have built friendly relationships based on the Korea-US alliance. Psomagen (950200.KQ), the US subsidiary of Macrogen (038290.KQ), has maintained cooperative relationships with US government agencies for years and provides genome and genomics analysis services to local universities and other institutions. The company is reported to have already absorbed a large volume of orders previously held by Chinese genomics firms last year, when the Biosecure Act was still under discussion.
Companies providing genetic diagnostic services such as prenatal screening—which BGI had been selling—may also benefit. 3billion (394800.KQ), an AI-based rare genetic disease diagnosis company, recently established a subsidiary called "3billion USA" in Delaware. It plans to expand partnerships with US hospitals and medical institutions starting next year.
However, investment costs related to analysis equipment may rise. Companies that had been using Chinese MGI equipment will need to replace their devices. The global top two genomics analysis equipment makers are currently Illumina and Thermo Fisher Scientific, both US companies.
"What matters is keeping American genetic information from leaving the United States," said Oh Gi-hwan, director of the Bio-Economy Research Center at the Korea Biotechnology Industry Organization. "There will be opportunities for indirect benefits, centered on companies that have established a presence on US soil and built track records."
