WuXi Bio Slumps on Geopolitical Concerns After US Draft Bill

Bloomberg News
·2 min read
  • Oops!
    Something went wrong.
    Please try again later.

(Bloomberg) -- WuXi Biologics Cayman Inc. shares slumped for the second day as investors worried over a ramp-up in geopolitical tensions following a US draft bill targeting Chinese biotech companies.

Most Read from Bloomberg

WuXi Biologics fell more than 6% in Hong Kong Monday, erasing earlier gains triggered by the firm’s denial of its Chief Executive Officer Zhisheng Chen’s ties with military-associated institutions. WuXi AppTec also tumbled by a similar magnitude following a 16% drop on Friday.

CEO Chen hasn’t worked for or received compensation from the Academy of Military Medical Sciences or any military-affiliated institution, WuXi Biologics said in a Monday stock exchange filing. A spokeswoman for the company told Bloomberg she had no further comment.

A bipartisan group of US House and Senate lawmakers last week introduced legislation aiming to block WuXi and other Chinese biotech companies — which they contend are controlled by the Communist Party and represent a national security risk — from accessing federal contracts.

Analysts warned that the US proposal could weaken investor confidence and re-trigger geopolitical concerns. The move comes as tensions between Washington and Beijing have worsened, and as former American leader Donald Trump — who waged a trade war with China during his time in office — seeks the 2024 Republican presidential nomination.

“Several Chinese companies doing overseas business do have exposure to geopolitical risks” and the US-China uncertainty is hurting investment sentiment, said Jialin Zhang, head of China healthcare research at Nomura International HK Ltd. The news isn’t good for the sector overall, “while other overseas contract development and manufacturing firms may be beneficiaries if China players continue to face this overhang,” Zhang added.

Short-selling turnover for WuXi Biologics and WuXi AppTec spiked Friday before stabilizing Monday, according to data compiled by Bloomberg.

China’s overseas rivals for contract research and manufacturing businesses advanced, with South Korea’s Samsung Biologics Co. rallying more than 5%. Swiss competitor Lonza Group AG closed 14% higher on Friday.

WuXi Biologics is one of the world’s biggest biologic contract research and manufacturing organizations, and was spun off from WuXi AppTec Co. several years ago. WuXi AppTec has called the alleged findings in the proposed bill “neither legitimate nor accurate,” and said its business won’t pose a security risk to any country.

--With assistance from Helen Sun and John Cheng.

(Updates with latest share moves, analyst comment)

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.