WuXi AppTec, Wuxi Bio tumble as US lawmakers propose ban

WuXi AppTec Co. tumbled by an intraday record in Hong Kong, with traders attributing the decline to proposed US legislation that would ban the Chinese medical technology company and its units from government contracts. 

WuXi AppTec plunged as much as 32% on Friday before trimming losses to about half, while Wuxi Biologics Cayman Inc. fell as much as 28% in Hong Kong. Their decline helped dragged the city’s benchmark index down by 2% at one point.

A bipartisan group of House and Senate lawmakers on Thursday introduced legislation that seeks to block some Chinese biotech companies — which they said are controlled by the Communist Party and represent a national security risk — from accessing federal contracts.

“This bill will protect Americans’ personal health and genetic information from foreign adversaries who have the ability and motivation to use it to undermine our national security,” Democratic Senator Gary Peters of Michigan said in a statement late Thursday in Washington.    

It wasn’t immediately clear why the market reaction to the legislation took place so many hours after the bill was introduced and reports on it had begun to circulate.  

It’s also not clear when or if the bill will be taken up in a committee, let alone make it to the floor of the House and Senate for a vote. But its co-sponsors have influence on the issue: Representatives Mike Gallagher and Raja Krishnamoorthi are the senior Republican and Democratic members of a select committee created to focus on critical US-China policies. 

WuXi AppTec didn’t immediately respond to an email seeking comment. Two calls to Wuxi Biologics went unanswered. 

Wuxi Biologics has one of the world’s biggest biologic contract research and manufacturing organizations and was spun off from WuXi AppTec several years ago. Wuxi Biologics’s Chief Executive Officer Chris Chen said after the proposed US bill that he’s never worked in any institution linked with the military, Chinese media outlet Jiemian reported.

Investors are worried that WuXi AppTec and Wuxi Biologics will “potentially be restricted from doing business with US firms,” said Jialin Zhang, head of China healthcare research at Nomura International HK Ltd., who cited the case of phonemaker Huawei Technologies Co. as an example. 

US Revenue

The proposal would, among other things, bar the US from purchasing equipment or services from listed companies or renew contracts with any entity who “uses biotechnology equipment or services produced or provided by a biotechnology company of concern” after the legislation goes into force.

Wuxi Biologics and WuXi AppTec had approximately 46% and 66% of their revenue generated from US customers, respectively, in the first half of 2023, according to Carol Dou, senior healthcare analyst at UOB Kay Hian. “The bill will significantly impact their business operations,” she said.

The legislation is the latest shot across the bow in US-China relations and underscores bipartisan concern in Washington over China’s access to sensitive information, particularly on US citizens.

It’s not clear when or if the bill will be taken up in a committee, let alone make it to the floor of the House and Senate for a vote. But its co-sponsors have influence on the issue: Representatives Mike Gallagher and Raja Krishnamoorthi are the senior Republican and Democratic members of a select committee created to focus on critical US-China policies.