Wuxi Bio Selloff Extends as Analysts Cut Forecasts

By Ben Otto

A selloff of Wuxi Biologics shares deepened Tuesday, taking losses this week to 30% as analysts cut forecasts in the wake of lowered guidance from the Chinese contract drugmaker.

Shares fell 8.4% on Tuesday, coming after a 24% tumble and a temporary trading halt a day earlier when the company surprised markets by trimming revenue and profit forecasts. Shares are now down nearly 50% on the year.

Analysts from Jefferies, Citi, Nomura and CCB International all cut target prices in the wake of the guidance, with several lowering revenue and profit forecasts through 2025.

Still, all kept buy or outperform ratings, citing the battered shares and the longer-term prospects of the company, which has been a maker of ingredients for AstraZeneca's Covid-19 vaccine.

"We think further downside is limited after [the loss on Monday,] and we still believe it is one of the most resilient names in the contract research organization space in the long run," Nomura wrote in a research note.

Jefferies analysts thought the stock could face volatility due to the company's expectations for a turnaround to begin only in the second half of next year, and with possible negative sentiment arising from upcoming elections in the U.S.

"We think investors would only be willing to pick up Wuxi Bio in the second half of 2024 and position themselves in 2025, anticipating US/China spotlight fading post election," Jefferies analysts wrote.

That said, the company "has one of the best risk/reward profiles among Chinese healthcare stocks, in our view," and "is in a sweet spot" to benefit from a rising trend of research and development outsourcing among drug companies and from its ability to act as a gateway into and out of China, Jefferies said.

Wuxi Bio said its revised outlook for revenue growth of 10% this year was due to a slowdown in biotech funding that had led to fewer projects, as well as delays in major projects.

The 10% mark stands in "stark contrast to... guidance for 30% earlier this year, when biotech funding was already shown to be weak," CCB International analyst Matthew Law wrote in a research note. He trimmed his target price to 66 Hong Kong dollars (US$8.44) from HK$77.

Shares closed Tuesday at HK$30.35, a record low.

Write to Ben Otto at ben.otto@wsj.com

(END) Dow Jones Newswires

December 05, 2023 03:47 ET (08:47 GMT)

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