US biotech strategic technology offshoring: genetic engineering is the next programmable substrate

One-line summary: Jason Kelly (Ginkgo Bioworks CEO, former NSCDB chair) argues that genetic engineering is a dual-use strategic technology analogous to AI — and the US is actively offshoring the innovation frontier to China, with 1,100 R&D jobs lost in Massachusetts in 2024 and 1/3 of MA lab space empty.

The insight

The NSCDB (National Security Commission on Emerging Biotechnology — Kelly chaired it) followed the same model as the Eric Schmidt AI commission that preceded it: identify a technology with military and economic strategic importance, ensure the US holds the frontier. Kelly's frame:

• Genetic engineering is not just therapeutics. DNA is a second programmable substrate alongside silicon. Agricultural biotech, industrial enzymes, biosecurity threats, national-defense applications — all downstream of the same cell-engineering capability base. Treating it as just "protein therapeutics" is dangerously narrow.
• The market structure makes the US the lever. US consumers pay 70% of global drug profits despite being 4% of the world's population. This is not a free market — it's a US-controlled market. The rules the US sets for drug access determine the economics of the global industry.
• The US is currently paying for Chinese capability building. US pharma is going direct to China to license drugs, US investors are funding Chinese biotech, and the innovation jobs are following. The US consumer pays for all the R&D that's building China's biotech capability.

The chain

US pharma bypasses US biotech → licenses drugs direct from China → discovery scientists lose jobs in US → R&D moves to China → genetic engineering frontier migrates offshore → strategic technology and dual-use capability in adversary hands.

Analog: this is what the AI commission worried about with semiconductors and software — except biotech has both economic and biosecurity dimensions.

Evidence

• jason-kelly in 2026-05-29-podcast-biotech-hangout-episode-184-may-29-2026 (genetic engineering as strategic programmable substrate): "I believe we are very much at the infancy of biotech...the engineering of a cell, the designing of DNA, this is our other sort of programmable substrate alongside computers. And we should not assume the only use of this technology is to make protein therapeutics...it is very clearly a technology that has dual use. Very clearly a strategic technology."
• jason-kelly in 2026-05-29-podcast-biotech-hangout-episode-184-may-29-2026 (US jobs and lab space): "I'm watching us offshore that to China and I'm watching us actively US investors, US pharmaceutical companies supporting the offshoring of what I consider to be strategic technology that will ultimately be more important than computers...we saw a decrease of 1100 R&D jobs in 2024. These are like US scientists who cannot get work anymore in the biopharma industry because that work is now happening in China. We have one third of our lab space here in the Massachusetts area empty right now."
• jason-kelly in 2026-05-29-podcast-biotech-hangout-episode-184-may-29-2026 (US market control argument): "70% of the profits for therapeutics originate with US consumers who make up 4% of the world's population...When you are 70% of the market, you can set the rules. And there isn't some weaselly way to get around that."
• From 2026-05-29-podcast-biotech-hangout-episode-184-may-29-2026 (Chris Garabedian articulating the bear case on restrictions): "the bigger risk is that Pharma bypasses US Biotech and goes straight to China to do the deals that GSK has done with Hangro and BMS has done and Pfizer's doing... that is a bigger threat where they don't need US Biotech." Kelly explicitly agreed: "That is exactly what I'm talking about."
• From 2026-05-29-podcast-biotech-hangout-episode-184-may-29-2026 (ASCO 2026 context, Endpoints sentiment index): Biotech sentiment index at 96 (vs 100 neutral baseline); investment/finance subgroup at 120 — the finance community is bullish even as the underlying innovation base is contracting. Bullish market sentiment may be masking structural deterioration.
• From 2026-05-29-podcast-biotech-hangout-episode-184-may-29-2026 (FDA regulatory tailwind): FDA Commissioner Makary out; interim Kyle Diamantis (Trump-adjacent, under Scott Gottlieb previously). Multiple CRL-rejected companies getting second chances — Reflimunoff announcing BLA resubmission for melanoma; Outlook resubmitting for bevacizumab/ophthalmology (FDA apparently guaranteed approval if manufacturing is okay); Dyne Therapeutics submitted BLA for next-gen Exon skipper. Regulatory environment shifting more permissive for US biotech at the margin.
• From 2026-05-30-autoresearch-regulatory-antitrust-tech-biotech-utilities (FDA acting leadership vacuum): Makary resigned May 12, 2026. Three top FDA positions (including drug review and regulation leadership) now held by "acting" officials with 210-day statutory time limits — further turnover likely before permanent appointments. Earlier departures: Peter Marks (biologics) and Richard Pazdur (oncology) — significant institutional knowledge loss in the review pipeline. User fee reauthorizations at risk: PDUFA, biologics, devices, biosimilars, and generics all expire September 30, 2027; acting leadership creates negotiation uncertainty with Congress. Drug developers with 2026 Q2–Q3 NDA/BLA submissions face higher variance — particularly smaller biotechs.
• From 2026-05-29-podcast-biotech-hangout-episode-184-may-29-2026 (Lilly vaccine acquisitions, $3.8B total): Eli Lilly bought three vaccine companies in one day — Curvo (shingles vaccine, $1.5B), Vaccine Company (EBV vaccine, $1.55B), Limatech (Staph aureus, $780M). Peter Marks (ex-FDA vaccines chief) already hired by Lilly. Lilly is building a domestic vaccine franchise at scale — the most capital-intensive way to stay ahead of a potentially Chinese-competitive vaccine market.
• From 2026-05-29-podcast-biotech-hangout-episode-184-may-29-2026 (Apogee Blackstone $1.3B non-dilutive): Apogee Therapeutics raised $1.3B in a non-dilutive synthetic royalty ($800M) + senior debt ($500M) structure from Blackstone Life Sciences, concurrent with positive Phase 2 data for atopic dermatitis antibody. Blackstone is becoming an active non-dilutive capital provider; this may signal that late-stage biotech can avoid equity dilution in the current market.
• From 2026-05-29-podcast-biotech-hangout-episode-184-may-29-2026 (Revolution Medicines ASCO Phase 3 — RVMD): Diraxonrasib (Pan-RAS inhibitor) Phase 3 Resolute-302 data at ASCO 2026: 13.2 months OS vs 6.7 months OS (standard chemo) in second-line pancreatic cancer — near-doubling of survival. Former Senator Ben Sasse treated with Diraxonrasib publicly. First commercial-scale Pan-RAS inhibitor result in a high-unmet-need oncology indication.

Why it matters to stock-market

• Policy asymmetry risk. If the COINS Act or equivalent legislation passes, it creates a structural headwind for drugs licensed from China and a tailwind for domestic US biotech. The US consumer = 70% of drug profits = US sets the rules is the thesis for why this is enforceable.
• Sector rotation signal. The 1,100 MA jobs lost + 1/3 lab space empty is evidence of a current structural contraction in US biotech employment, not just a cyclical downturn. If the policy pendulum swings (COINS Act / industrial policy), this reverses. If it doesn't, the contraction continues.
• Lilly vaccine build-out: LLY is assembling a standalone domestic vaccine business ($3.8B acquisitions in one day); the Peter Marks hire suggests intent to accelerate FDA approval timelines from the inside. Not currently in suggested-tickers but worth monitoring.
• Near-term sector catalyst: RVMD Diraxonrasib ASCO data (May 2026 plenary) is a potential re-rating event for the Pan-RAS inhibitor class and for clinical-stage oncology more broadly.

Names and exposures

Ticker	Exposure	Conviction
XBI	SPDR S&P Biotech ETF — broad US biotech; benefits from FDA tailwind + potential COINS Act restriction on Chinese competition	Low-medium — macro call, not specific thesis; better as a hedge or satellite than a core position
GNKG	Ginkgo Bioworks — the purest play on synthetic biology as a programmable substrate; Kelly's company; platform is the infrastructure for the thesis he's articulating	Low — highly speculative, cash-constrained; thesis is long-dated (genetic engineering frontier ≠ immediate revenue); monitor for turnaround signals

Contradictions / tensions

• Chris Garabedian's counter-argument: The COINS Act may be overly restrictive — most Chinese-licensed drugs are legitimate therapeutic advances, not strategic military threats. Restricting access hurts US patients. Kelly's response: the issue is not the drugs, it's who builds the underlying engineering capability.
• "Euro-washing" concern: Peter Kolchinsky/RA Capital argue multinationals will route through European subsidiaries to bypass US restrictions. Kelly's counter: the US is 70% of the market — you can't sell drugs in the US market without complying, regardless of corporate domicile.
• Biotech sentiment vs. structural contraction: The finance/investment community is bullish (Endpoints index 120 for investors) while the underlying innovation base (jobs, lab space) is contracting. These two signals are inconsistent — either the finance community is early on a recovery thesis, or it's mispricing a structural decline.
• FDA tailwind timing: Kyle Diamantis is interim, not confirmed. The more permissive posture on CRL reversals could be short-lived if a Maha-aligned permanent commissioner is appointed.

What would weaken this thesis

• COINS Act fails or is substantially watered down — policy tailwind doesn't materialize.
• US biotech industry demonstrates it can compete directly with Chinese CROs on cost/speed without government protection.
• FDA becomes more restrictive again under a new permanent commissioner, erasing the regulatory tailwind.

Related

• us-critical-mineral-independence — analog: same China-strategic-technology pattern, minerals vs. biotech
• us-industrial-policy-tariff-shield — the industrial policy backdrop
• defense-industrial-base-magazine-depth — same NSCDB-adjacent national-security lens, different technology base