China's WuXi AppTec rebuts US bill claims of government ties, shares volatile (updated)

WuXi Biologics (Cayman)

05/02/2024 04:06

(Adds share price reaction, analyst, fund manager comments)
       HONG KONG/BEIJING, Feb 5 (Reuters) - Hong Kong-listed
shares of China's WuXi AppTec  2359.HK  jumped as much as 7.6%
on Monday after it said it has no links with any governments or
their military organisations, and it should not be listed as a
"biotechnology company of concern" in a draft U.S. bill.
    The drug research and development group said in a filing to
the Shanghai Stock Exchange on Sunday that it has no human
genomics business and does not collect human genome data in any
of its existing businesses.
    The company "has not, does not and will not pose a national
security risk to any country," it said.
        A U.S. congressional committee focused on China has
introduced a bill that would restrict federally funded medical
providers from contracting WuXi AppTec and other Chinese biotech
companies, citing WuXi AppTec's alleged military ties as part of
the reason. 
    WuXi AppTec's Hong Kong-listed shares rose as much as 7.6%
to HK$47.00 after plunging 21% on Friday amid investor fears
over the U.S. draft bill. WuXi AppTec provides drug research and
development and manufacturing services. 
        Its Shanghai-listed shares were down almost 3% in
mid-morning trade on Monday, paring earlier losses of nearly
10%, while its affiliate, vaccine maker WuXi Biologics  2269.HK 
was up more than 4%. 
    "This is an investor confidence problem ... this year is the
U.S. election year, so there could be a lot of similar news in
terms of restrictions on China (companies) going forward that
weigh on investor confidence," said Steven Leung, director of
institutional sales at UOB Kay Hian in Hong Kong. 
    "I think until we see some clarifications of the details of
the relevant bill from the U.S. side, pressure on the relevant
companies and the healthcare sector will continue to be
significant." 
    WuXi AppTec's Hong Kong shares  2359.HK  lost HK$8.08
billion ($1.03 billion) in market value last week, while its
Shanghai shares  603259.SS  lost 40.4 billion yuan ($5.61
billion), resulting in a combined loss of $6.64 billion for the
stock. WuXi Biologics lost HK$33.08 billion ($4.23 billion) in
market value last week.  
    The U.S. bill would prohibit federal agencies from
contracting with China's BGI Group, WuXi AppTec, their
subsidiaries, affiliates and other biotechnology companies of
concern. It would also stop the government from entering into
contracts with companies that use their equipment or services.
        "The bill, whether it is passed or not, is a sword
hanging over the head. Shares of Wuxi AppTec/Biologics will be
under pressure for a long time," said a senior healthcare fund
manager who declined to be named as he is not authorised to
speak to media.
    BGI Group, which is not listed, has said it supports
protecting personal data, but the legislation "which will
effectively drive BGI from the U.S. market will not accomplish
this goal." The company added that in the U.S. it does not
collect patient samples or have access to personal or genetic
data.

 (Reporting by Donny Kwok and Summer Zhen in Hong Kong and Ethan
Wang and Ryan Woo in Beijing; Writing by Anne Marie Roantree;
Editing by Jamie Freed)
 ((Ethan.Wang@thomsonreuters.com;))