WuXi Companies' Shares Surge on Report of Potential Asset Sales

By Kimberley Kao

Shares of the WuXi family of companies rose sharply Friday in Hong Kong after a media report that the Chinese biotech companies may be looking to divest some assets, as concerns over potential U.S. restrictions continue to weigh on the businesses.

WuXi AppTec stock rose as much as 16% to 69.95 Hong Kong dollars, equivalent of $9.01, after a report by Financial Times on Thursday cited three people familiar with the matter as saying that WuXi AppTec wants to sell WuXi Advanced Therapies, its manufacturing unit for cell and gene therapy which has operations in the U.S.

In response to a request for comment, a WuXi AppTec spokesperson said that the company is "assessing options for continuing WuXi Advanced Therapies' (WuXi ATU) operations in line with our priorities: our employees and the patients who need essential, time-critical and life-saving treatments."

Wuxi Biologics rose as much as 17% to HK$21.85, with the same report citing people familiar with the situation that the company was gauging interest in its European production facilities.

In response to the report, a Wuxi Biologics spokesperson said it "regularly conducts business reviews" and doesn't comment on market speculation.

In September, the U.S. House of Representatives took a step forward to curb Chinese companies' U.S. operations by passing a draft of the Biosecure Act, which designates the WuXi companies as a "biotechnology company of concern." The bill aims to bar federal contracts with the Beijing Genomics Institute and some Chinese biotech entities, including the WuXi companies, due to alleged military ties. The latest draft Biosecure bill will also restrict U.S. government agencies from using funding, loans or grants for contracts that would use certain biotechnology equipment or services from a designated company.

WuXi AppTec and Wuxi Biologics have denied posing a security risk to the U.S. and associations with the People's Liberation Army in China. The bill will move onto the Senate floor before it can be sent to President Joe Biden to be signed into law.

If the sales happen, "investors could react more positively on WuXi AppTec than Wuxi Biologics," given that the gene business, which WuXi ATU is involved with, is "a leading cause of the Biosecure Act," Nomura research analyst Jialin Zhang says in a note. Any sales would likely still depend on how the Biosecure Act legislation develops, Zhang adds.

"In case of the [business unit's] disposal, the controversy surrounding Wuxi AppTec might be somewhat relieved," Zhang adds. If Wuxi Biologics is mulling the sale of its European business, that may be due to supply and demand issues rather than geopolitics, Zhang says.

Write to Kimberley Kao at kimberley.kao@wsj.com

(END) Dow Jones Newswires

October 04, 2024 02:44 ET (06:44 GMT)

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