WuXi AppTec Co. experienced a significant decline in the Hong Kong stock market, raising alarms among investors due to looming US legislation potentially prohibiting the Chinese medical technology firm and its affiliates from engaging in government contracts.

The shares of WuXi AppTec took a steep dive, dropping as much as 27%, while its counterpart, WuXi Biologics Cayman Inc., saw a decrease of up to 23%. This downturn has led both companies’ stocks to hit their lowest point since 2019, contributing to a minor 0.3% fall in the Hong Kong benchmark index.

Jialin Zhang, the Head of China healthcare research at Nomura International HK Ltd, attributed this decline primarily to “worries about the US bill’s approval.”

Legislative Pressures

The heart of the matter lies in a bill introduced last week by a bipartisan assembly of House and Senate lawmakers. The proposed legislation aims to curtail certain Chinese biotech entities, which are purportedly under the Communist Party’s control and thus pose a national security threat, from gaining access to federal contracts.

In particular, the draft bill identifies WuXi AppTec, along with its parent and subsidiary entities, as “biotechnology companies of concern.” It also claims that WuXi Biologics’ CEO, Zhisheng Chen, has affiliations with a military-related institution, a connection the company has refuted in an official statement to the stock exchange.

Significant Financial Impact

The proposed US legislation has catalyzed a severe market selloff for WuXi AppTec and WuXi Biologics, culminating in a staggering loss of $17 billion in market capitalization as of the market closure on Thursday.

Carol Dou, a senior healthcare analyst at UOB Kay Hian, pointed out that “geopolitical risks are notably elevated, particularly during the US election period, prompting investors to steer clear of these short-term uncertainties.”

The financial tremors felt by WuXi AppTec and WuXi Biologics underline the broader tensions and the intricate interplay between geopolitical maneuvering and market dynamics, especially in sectors as pivotal as biotechnology. As the situation unfolds, the global market watches closely, anticipating the potential ripple effects of these legislative developments.

Source: https://www.bnnbloomberg.ca/wuxi-shares-lose-17-billion-on-fear-us-to-target-china-biotech-1.2029868