US bill poses risk to Wuxi AppTec and its Western drugmaker partners

WuXi Biologics (Cayman)

05/02/2024 11:02

By Andrew Silver
       SHANGHAI, Feb 5 (Reuters) - A draft U.S. bill that has
triggered a sell-off in shares of China's biotech firm Wuxi
Apptec could deal a major blow not just to the firm but could
also impact many labs and Western drugmakers that rely on it for
research and manufacturing, public data showed.    
    A congressional committee focused on China introduced a bill
late last month that would restrict federally funded medical
providers from allowing China's BGI Group, Wuxi Apptec and other
biotech firms from getting genetic information about Americans.
    Similar legislation was introduced in the Senate to prohibit
federal agencies from contracting with those firms and also stop
the government from entering into contracts with companies that
use their equipment or services. The bill has a long path
forward before potentially becoming law.
    Wuxi AppTec's shares, listed in Shanghai and Hong Kong, have
since tumbled nearly 50%. Its Hong Kong shares  2359.HK  rose 4%
on Monday, while Shanghai shares  603259.SS  dropped 4% after
the company said it has no links with any governments or their
military institutions and does not collect human genomic data in
any of its business.
    Founded in 2000 by its chairman and CEO Ge Li, who earned a
doctoral degree in organic chemistry from Columbia University,
Wuxi has grown to a leading company offering early drug research
and development services and contract manufacturing for Western
companies, according to its website.
    The company or its affiliate Wuxi Biologics  2269.HK  have
counted Pfizer  PFE.N , AstraZeneca  AZN.L  and GlaxoSmithKline
 GSK.L  as well as state-funded U.S. labs as its partners. Their
projects include a research on Alzheimer's disease with
researchers from Pfizer, a vaccine component production deal
with AstraZeneca and a licensing agreement with GSK on
antibodies for cancer research.
    The Lawrence Livermore National Laboratory has also used
Wuxi's services on an antivirals lab project, using virtual
compounds synthesized by Wuxi AppTec, according to a 2022 report
from the U.S. Department of Energy Office of Scientific and
Technical Information.
    AstraZeneca, Pfizer, GSK and Lawrence Livermore National
Laboratory did not immediately respond to requests for comment.
    The group also has a large presence in the United States
with multiple offices including a lab testing facility in New
Jersey that it said in 2018 would be "one of the largest" labs
for drug development testing in the country. Services it offers
in the U.S. include cell and gene therapy manufacturing and
biologics testing, according to its website.     
    Such projects and expansion work helped the U.S. market
become the biggest source of revenue for Wuxi AppTec, accounting
for two thirds of its total revenue of 29.5 billion yuan ($4.10
billion) in the first nine months of 2023.
    "The proposed bills are still in their early stages in the
legislative process," said Yiming Liu, a partner at Cooley LLP.
"There is no set timeline for when either chamber of Congress
must consider the bills."
    Analysts, however, caution Wuxi shares would continue to
come under pressure.
    "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.
.($1 = 7.1979 Chinese yuan renminbi)

 (Reporting by Andrew Silver in Shanghai, Donny Kwok and Summer
Zhen in Hong Kong and Ethan Wang and Ryan Woo in Beijing;
Editing by Miyoung Kim and Ros Russell)
 ((andrew.silver@thomsonreuters.com;))