TLDR:
- WuXi Biologics stock price rose 14.50% to $5.45 on October 4
- WuXi considering sale of some manufacturing units due to BIOSECURE Act
- US House passed BIOSECURE Act to limit business with Chinese companies
- WuXi’s European revenues dropped 27% in H1 2024
- WuXi employs about 600 people at its Dundalk, Ireland facility
WuXi Biologics, a leading Chinese contract development and manufacturing organization (CDMO), is reportedly considering the sale of some of its manufacturing units in response to regulatory pressures and changing market conditions.
This news comes as the company’s stock price saw a significant uptick, rising 14.50% to $5.45 on October 4, 2024.
The potential asset sales are being explored against the backdrop of the advancing BIOSECURE Act in the United States. This bipartisan bill, which recently passed the US House of Representatives with a vote of 306 to 81, aims to prevent US pharmaceutical companies from conducting business with entities deemed to pose national security risks.
If enacted, the legislation would significantly impact Chinese service companies operating in the pharmaceutical sector.
WuXi Biologics and its sister company, WuXi AppTec, are among the five major targets of the BIOSECURE Act. In response to these developments, WuXi AppTec is reportedly considering the sale of its cell and gene therapy manufacturing unit, WuXi Advanced Therapies.
This subsidiary includes four laboratories and manufacturing facilities in Philadelphia, according to sources familiar with the matter.
Similarly, WuXi Biologics is said to be gauging interest in some of its European production facilities. The company has experienced a notable decline in European revenues, reporting a 27% drop to Rmb1.8bn ($260 million) in the first half of 2024 compared to the same period in 2023. This downturn may be influencing the company’s strategic decisions regarding its European assets.
The BIOSECURE Act, if passed by the US Senate and signed into law by President Biden, would allow existing contracts to continue until January 2032 under a grandfather clause. However, the legislation has already begun to impact WuXi’s business prospects, with reports suggesting that new business in Europe has slowed significantly in recent months.
WuXi Biologics has a substantial presence in Ireland, with a major manufacturing facility outside Dundalk that employs approximately 600 people.
The company invested €325 million in this plant in 2018, positioning it as one of the largest contract manufacturing sites for single-use biologics globally. In 2019, WuXi Vaccines announced an additional $240 million investment in another facility at the Dundalk site.
Despite these investments, WuXi Biologics Ireland Ltd reported operating losses of €72.5 million in its most recent financial results. However, the company also saw a significant increase in revenues, jumping from €16.1 million to €100.2 million as it transitioned from startup phase to delivering batches for its first client.
The potential asset sales are not guaranteed, and sources suggest that WuXi Biologics may opt to retain its European facilities if existing clients choose to continue their partnerships. The company is reportedly working with advisers to assess the level of interest in some of its European plants, including two in Germany.
In response to inquiries about the potential sales, a WuXi Biologics spokesperson stated,
“As a company, WuXi Biologics regularly conducts business reviews. However, we do not comment on market speculations.”
The Chinese government has expressed opposition to the BIOSECURE Act, with foreign ministry spokesperson Mao Ning describing it as a “discriminatory” measure.
She called on the US to “abandon ideological bias, respect the principles of market economy and trade rules, stop advancing that bill, and stop suppressing Chinese companies under various pretexts.”
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