China’s WuXi explores sale of pharma units as US restrictions loom

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Two affiliated Chinese drug manufacturers targeted by forthcoming US national security legislation are working on sales of some of their operations, according to people familiar with the matter.

WuXi AppTec and WuXi Biologics are among five China-based companies targeted by the Biosecure Act, which would ban drugmakers with US government contracts from using the Chinese groups’ services after 2032. The bipartisan bill overwhelmingly passed the House of Representatives last month and is making its way through the Senate.

WuXi AppTec has put its cell and gene therapy manufacturing arm WuXi Advanced Therapies, which operates four laboratories and manufacturing facilities in Philadelphia, up for sale, according to three people familiar with the matter. Discussions have been ongoing for months and rival contract manufacturers have been approached about buying all or some of the assets.

Separately, three people familiar with the situation said WuXi Biologics was working with advisers to test interest in some of its European production facilities, which management fears it may no longer need. New business in Europe has dried up in recent months, as biopharma companies with or seeking US federal contracts have become reluctant to use WuXi in light of the legislation. Revenues from European customers fell 27 per cent in the first six months of 2024 compared to a year earlier, to Rmb1.8bn ($260mn).

WuXi Biologics told the FT it “continues to experience good business momentum. We are consistently securing new projects across all regions including the US, EU, China and the rest of Asia”.

The Biosecure Act has made the pharmaceutical industry the latest sector subject to growing trade and national security tensions between the US and China after technology companies such as TikTok were targeted.

Both WuXi entities, which are related but operate independently, are key cogs in the US and global pharmaceutical supply chain, playing a role in the production of AbbVie’s $3.5bn a year cancer drug Imbruvica and Pfizer’s anti-Covid pill Paxlovid, among dozens of other medicines, according to GlobalData.

More than 20 drugmakers, including AbbVie, have flagged their reliance on WuXi companies in regulatory filings this year, according to AlphaSense.

Chief among WuXi Biologics’ assets being reviewed for sale are two German manufacturing facilities it bought from Bayer and spent extensively on expanding last year. WuXi Biologics also has large production facilities in Ireland.

WuXi AppTec told the Financial Times it was “assessing options” for continuing its Advanced Therapies unit’s operations “in line with our priorities: our employees and the patients who need essential, time-critical and life-saving treatments”.

WuXi Biologics said it “regularly conducts business reviews, with a focus on delivering a consistently high return on investment across all assets for our investors. We do not comment on market speculations”.

With the Biosecure Act declaring WuXi “a biotechnology company of concern”, WuXi AppTec shares are down 14 per cent, while those of WuXi Biologics have fallen nearly 30 per cent this year. Cumulatively, both companies are valued at about $36bn.

A provision in the act allows existing contracts with WuXi to run their course, meaning very few existing US clients have to cut ties. But the businesses are struggling to win over new customers. WuXi AppTec’s revenues are projected to fall slightly this year compared with 2023, and with the US election in November, WuXi AppTec executives point out that the time left for the bill to pass in this legislative session is narrowing.

People briefed on the sale processes said it was possible that the assets may not be sold. They added that WuXi AppTec and WuXi Biologics were seriously considering their options as they may no longer need as much production capacity as previously thought.

WuXi Biologics may opt to keep their European facilities if existing clients decide to stick with them, as the Biosecure Act will take time to have an effect, a person said.

In a rare bright spot, WuXi AppTec said in an investor update last month that its main chemistry division, which does not include the Advanced Therapies unit, continued to benefit from an increase in new clients and active business in the first half of this year, sending the stock up nearly 24 per cent, the biggest intraday jump since its 2018 listing.