WuXi sinks 22pc as units caught in US crosshairs

Shares of WuXi Biologics (2269) once sank by a record 32 percent and traded 22.77 percent lower at HK$62.25 before trading was halted yesterday in Hong Kong, after two subsidiaries were added to a list of companies that may need extra permits to buy products from the US.

The two firms were among 33 Chinese entities added to the unverified list, and the Commerce Department said it was taking the step as it was unable to verify the "legitimacy and reliability" of those entities in relation to their use of US exports, that may be misused.

While firms on the list aren't barred from doing business in the US, they may need additional licenses for purchases from American firms.

"The affected companies are only in Shanghai and Wuxi and our factories in Shanghai and Wuxi have already been built, so there is no longer any need to buy large amounts of hardware for bioreactors," WuXi Biologics chief executive Chris Chen Zhisheng told an investor call yesterday.

In an exchange filing, WuXi Biologics said that the incident "has no material adverse effect on its business or ongoing services to its global partners, and that the impact to its imports is not significant, as such imported equipment is not required after the construction of facilities in Shanghai and Wuxi."

Tradings in its shares will resume today, it said.

The Chinese biotech firm has been importing certain hardware controllers for bioreactors and certain hollow fiber filters that are subject to US export controls but have received approval for the last 10 years, the announcement said.

The company is pursuing interim measures to remove these subsidiaries from the list, the statement said.

Chen said company lawyers plan to negotiate with the Commerce Department.

On its WeChat account, WuXi said the US department has a routine process to verify the proper use of these on site, but this process has not been completed in the last two years due to the Covid-19 pandemic.

"We welcome inspection at any time for the clearance and removal from such list," it said.

Following the news, China's Ministry of Commerce responded that in recent years, the US has used export controls as a tool for political suppression and economic bullying, adding that the US side should immediately correct the wrong practices.

Other biotech firms WuXi AppTec (2359) and JW (Cayman) Therapeutics (2126), which said they don't have a stake in WuXi Biologics, also slumped 13 percent and 3 percent, respectively.

Ascletis Pharma (1672), in contrast, saw its shares soaring more than 10 percent after claiming its anti-Covid drug may have "better efficacy against Covid-19 in clinical trials compared to Molnupiravir."