China’s MGI Tech said it would press ahead with the US rollout of its gene sequencing machines as it was “completely different” from its former parent group, which has been blacklisted in the US.
Shenzhen-based MGI was a subsidiary of BGI — parts of which are subject to US trade restrictions over concerns about the security of Americans’ genetic data — before it was spun out and listed on the Shanghai stock exchange in 2022.
BGI founder Wang Jian still holds 47 per cent of MGI shares, according to business data platform Tianyancha.
In an interview, MGI’s chief scientific officer Rade Drmanac rejected suggestions that the company could struggle to make inroads because of fears over remaining ties to BGI.
“BGI Genomics is a completely different company,” he said. “MGI is a public company. It’s a spinout from BGI. It’s sort of independent, majority owned by investors and employees.”
Drmanac said the company’s gene sequencing machines were “more accurate and efficient” than equipment sold by market leader Illumina.
MGI products will be sold in the US under the brand Complete Genomics. Complete Genomics is a US-based subsidiary of MGI, which was co-founded by Drmanac and acquired by BGI in 2013 for almost $120mn.
Mike Orlando, who leads the National Counterintelligence and Security Center, part of the US intelligence community, said his organisation had issued “multiple warnings” about potential threats from Chinese genomic companies.
“Among our concerns is PRC [People’s Republic of China] government collaboration with several of these firms for state surveillance, societal control, and military research in China,” Orlando told the Financial Times.
Orlando said the US was concerned about Chinese genomic companies gaining access to data from foreign populations, including in the US, through diagnostic testing and analysis and international partnerships.
“In the wrong hands, US genomic data poses serious risks not only to the privacy of Americans, but also to US economic and national security,” Orlando added.
Lindsay Gorman, head of the technology and geopolitics team at the German Marshall Fund of the United States, said MGI’s spin-off from BGI could become an issue of interest for US authorities if clear ownership ties remained between the companies.
“It has become a common modus operandi for Chinese companies to spin off companies from parents that have garnered some policymaker concern and brand them as something different but retain ownership or financial ties,” she said.
“This can result in a whack-a-mole approach by authorities with sanctions.”
Analysts warned that increasing tensions between the US and China over sensitive technologies and data security would make it challenging for MGI to persuade customers to switch from Illumina.
“Competitors like MGI have to prove the integrity of their sequencers, and who is privy to the data they produce,” said Conor McNamara, analyst at RBC Capital Markets.
MGI’s US expansion follows a decision last month by the Biden administration to place three units of BGI on the so-called entity list over concerns that genetic data they collect could be diverted to China’s military. US companies have to apply for — generally hard to receive — licences to export technology to companies on the blacklist.
Data collected by BGI Research, BGI Tech Solutions and Forensics Genomics International pose a “significant risk” of contributing to surveillance by Beijing, the US Department of Commerce claims, adding that such data has been used in the repression of ethnic minorities.
Inclusion on the US entity list makes it difficult for targeted companies to receive shipments of US goods from suppliers. BGI rejects the claims by the Biden administration.
MGI said it had received some queries about its Chinese ownership and data security from potential US customers and suggested that rivals may seek to capitalise on these in competitive negotiations.
The company has told customers that all their data can be safely secured within their own laboratories and would not be sent back to China.
“Our customers are sophisticated, educated biologists with high education levels and they really know their stuff,” said Yongwei Zhang, chief executive of MGI Americas.
“So when we explain to them, most of the time they are OK. They understand that data security is absolutely not an issue . . . MGI instruments are completely controlled within the lab.”
MGI is valued at almost $6bn, roughly a sixth of the size of Illumina, and is launching in the US at a time when its main rival is distracted by a battle with regulators and activist investor Carl Icahn over its acquisition of cancer screening company Grail.
MGI makes one of the world’s most powerful gene sequencing machines, the DNBSEQ-T20x2, which can cut the cost of sequencing a human genome to $100, a long sought-after industry milestone.
The company was previously restricted from selling many of its products in the US because of patent litigation pursued by Illumina, which controls 80 per cent of the global market. But the expiry of key Illumina patents last year has enabled MGI to target US customers.
Additional reporting by Eleanor Olcott in Hong Kong and Xueqiao Wang in Shanghai
Source: News