WuXi AppTec, WuXi Biologics surge in Hong Kong as biotech firms put some operations for sale

 Shares of WuXi AppTec and WuXi Biologics surged in Hong Kong on Friday, following a report that the two firms are looking to divest some of their operations in the wake of new United States legislation targeting Chinese biotech companies.

WuXi AppTec’s shares closed up almost 12 per cent to HK$67.10 on Friday, while shares of subsidiary WuXi Biologics rose nearly 15 per cent to HK$21.45.

Those gains were made after The Financial Times, citing people familiar with the matter, reported on Thursday that WuXi AppTec has put on the market its cell and gene therapy unit WuXi Advanced Therapies, which operates four laboratories and manufacturing facilities in Philadelphia, Pennsylvania.

According to the report, WuXi Biologics is working with advisers to gauge interest from potential bidders for its European production facilities, including two in Germany and one in Ireland.

One of about 10 facilities operated in mainland China by WuXi Biologics, a global contract research, development and manufacturing organisation. Photo: WuXi Biologics

Friday’s market performance comes weeks after the shares of WuXi AppTec and WuXi Biologics tumbled in Hong Kong after the US House of Representatives last month passed a bill that would restrict business with certain targeted Chinese biotech companies.

The reported divestment initiatives show the two companies’ efforts to head off the potential impact of the Biosecure Act, which must be approved by the US Senate before it goes to President Joe Biden for his signature.

If the bill is enacted into law, it will bar federal contracts with the targeted Chinese firms and their American subsidiaries. The initial targets are WuXi AppTec, WuXi Biologics and BGI Group, along with its spin-off MGI and US subsidiary Complete Genomics.

The legislation aims to encourage US firms to cut their reliance on Chinese research and manufacturing, while safeguarding US data and American firms’ intellectual property that could be threatened by China.

WuXi AppTec and WuXi Biologics previously denied that they pose any security risk to the US.

WuXi AppTec founder, chairman and chief executive Li Ge (centre) is flanked by then-joint company secretary Yao Chi (left) and vice-chairman Edward Hu at the firm’s global offering press conference in Hong Kong on November 30, 2018. Photo: Edward Wong

Chinese biotech companies, like the broader technology sector, have become ensnared in tensions between Beijing and Washington. The Biden administration and ally nations have imposed export restrictions on China that cover the most cutting-edge products, including artificial intelligence chips.

There were a total of 28 measures scheduled for a vote last month by the Republican-led House that reference or focus on competition with China, addressing issues ranging from countering Beijing’s technological, political and economic influence to bolstering American allies in the Indo-Pacific. Most of the bills are Republican-led, but draw on bipartisan support.

WuXi AppTec reported first-half revenue of 17.24 billion yuan (US$2.4 billion), down 8.6 per cent from a year earlier, while its profit fell 20 per cent to 4.24 billion yuan in the same period. That marked the first time in five years that the company saw a decrease in both its top and bottom lines.

The company generated 65 per cent of its sales from the US last year, according to Zhongtai Securities. For WuXi Biologics, 58 per cent of its sales came from the US in the first half of this year.

Chinese-American scientist and entrepreneur Li Ge – with a net worth of US$5.1 billion as of Friday, according to Forbes – founded WuXi PharmaTech in Shanghai in December 2000. The company was renamed WuXi AppTec in 2008 after acquiring US medical-device and biologics testing firm AppTec Laboratory Services, a year after the firm was listed in New York. The company was delisted in the US market in 2015.

Before founding his own company, Li had worked for US biotech firm Pharmacopeia after completing his studies. He received a PhD degree in organic chemistry from Columbia University in 1994 after graduating from Peking University in 1989.

https://www.scmp.com/news/article/3281119/wuxi-apptec-wuxi-biologics-surge-hong-kong-biotech-firms-put-some-operations-sale