WuXi Bio, AppTec Jump as Biosecure Act Leader Quits Congress

Sangmi Cha
·2 min read
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(Bloomberg) -- Shares of WuXi Biologics Cayman Inc. and its sister company WuXi AppTec Co. gained in Hong Kong after a US lawmaker sponsoring a bill that would block the companies from federal contracts said he will leave the House next month.

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WuXi Biologics and WuXi AppTec rose 7.7% and 4.9% in Hong Kong, respectively, after Republican Congressman Mike Gallagher, chairman of a high-profile select committee on China, said he will quit Congress. Both stocks have lost more than 50% so far this year, and are the two worst performers on the MSCI China Index.

The Biosecure Act, which was introduced in January, injected a new source of uncertainty for Chinese stocks already weighed down by the country’s sluggish economy. If passed, it might prevent WuXi Biologics and WuXi AppTec from accessing US government contracts.

Gallagher’s departure leaves House Speaker Mike Johnson able to lose only one lawmaker on any party-line vote starting April 19. Gallagher, who also took a key role on legislation that would force TikTok’s Chinese parent company to sell it or face a ban in the US, previously said he wouldn’t run for reelection — but his early resignation wasn’t expected.

Read more: Slim Republican House Majority Shrinks Further as Lawmaker Quits

WuXi Biologics and WuXi AppTec are already past the “worst case scenario,” Bernstein China pharma and biotech senior research analyst Rebecca Liang said, adding that the market is still evaluating the potential impact of the legislation on the companies.

“I think what the capital market is deciding at this point is decoupled from the actual business sense, which is going back to how a hard landing case is not in the best interest for both China and the US,” she said in a Bloomberg Television interview when asked about the two stocks.

Read more: WuXi Bio, WuXi AppTec Extend Losses on US Draft Bill Concerns

WuXi Biologics will report full-year earnings report on Tuesday, and market watchers are looking out for any updates on the US bill for its impact year-to-date and outlook for the rest of the year, including potential cancellation of contracts. Its options-implied one-day earnings move is 7.8% versus an average of 4%.

The key focus will be the company’s 2024 outlook, and “it would be interesting to see if there are any guidance downgrades,” said Daiwa Capital Markets analyst Wilfred Yuen, who noted that WuXi AppTec gave weak forecasts when it reported earlier this month.

--With assistance from Ernest Tsang.

(Updates market pricing in second paragraph, new chart and earnings, data in last two paragraphs.)

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