WuXi Biologics fails to quell fears over US clamp, falls 5pc

WuXi Biologics (2269) yesterday reiterated that its chief executive and executive director Chen Zhisheng has no affiliation with Chinese military institutions, but the reassurance failed to stem the decline of its shares in Hong Kong.

Shares of WuXi fell for a second trading day by 5.7 percent to HK$23.15 in Hong Kong, as investors worried over a ramp-up in geopolitical tensions following a US draft bill targeting Chinese biotech companies. The fall erased earlier gains triggered by the firm's denial.

WuXi AppTec (2359) also tumbled by 10.6 percent following a 16 percent dive on Friday.

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 stock exchange filing yesterday, and 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 retrigger 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. 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.

WuXi Biologics is one of the world's biggest biologic contract research and manufacturing organizations, and was spun off from WuXi AppTec 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.