U.S. Lawmakers Target WuXi AppTec with Proposed Biosecurity Bill, Triggering Stock Plunge; Ge Lan Begins Trimming Holdings in Q4

Special Topic: The Circulation of the U.S. Biosecurity Bill in the Industry Leads to a Sharp Decline in WuXi AppTec's Stock Prices

In the afternoon of January 26, the CXO (pharmaceutical R&D services) concept suddenly plunged, causing a number of CXO companies to fall as well, with the leading companyWuXi AppTec(Maintain Rights)Plummeted to the daily limit down.

The reason, according to media reports, is that U.S. lawmakers have introduced legislation requiring a ban on American companies signing contracts with overseas biotechnology providers.Contract, to ensure that these companies cannot access U.S. taxpayers' funds, targeting Chinese companies with overseas operations, includingWuXi AppTec, etc.

As the "Pharmaceutical Maotai",WuXi AppTecRanked high among the publicly offered heavy-hold individual stocks. Among them, "Goddess of Medicine" Ge Lan has three products holding.WuXi AppTec, accounting for more than 9% of the net asset value.China-Europe FundIt has also become the public offering institution with the largest shareholding. Following closely behind is,BoComm Schroders Fund, with a total of 24 products heldWuXi AppTec。

　　Flash Crash to Limit Down

As of the closing on January 26,WuXi AppTecA-shares plunged to RMB 65.96 per share, with a total market value of RMB 194.8 billion; H-shares plummeted 16.43% to HKD 64.6 per share, with a total market value of HKD 190.8 billion.WuXi Biologics(02269.HK) also suffered a heavy blow, closing down 18.17% at HKD 24.55 per share, with a total market value of HKD 104.5 billion.BGIStock price fell more than 3%;MGI TechStock price fell more than 5%.

On the news front, according to media reports, a draft version of the Biosecurity Act was submitted to the U.S. House of Representatives on January 25, 2024.Traditional Chinese MedicineWuXi AppTec was mentioned, and a similar bill draft has recently been introduced in the U.S. Senate.

U.S. lawmakers have proposed to ban American companies from signing contracts with overseas biotechnology providers, including the procurement or acquisition of any biotechnology equipment or services produced or provided by relevant biotech firms, to ensure that these enterprises cannot access U.S. taxpayer funds. Overseas-operating Chinese companies directly affected include WuXi AppTec.BGIand its subsidiaries, such as MGI Tech and Complete Genomics.

Shortly after the stock price plummeted,WuXi BiologicsThe CEO stated publicly: "This is just a proposal from a legislator, and the chance of it becoming law is extremely small. Even if it does, it will take several years. The company will release...Announcement。”

On the evening of January 26, WuXi AppTec issued a clarification announcement regarding this matter. WuXi AppTec stated that the above-mentioned draft of the Biosecurity Act has not yet been officially enacted and promulgated. The subsequent legislative process requires the U.S. House of Representatives and the Senate to vote on their respective versions of the bill after review by relevant committees in order to form the final version.

WuXi AppTec believes that the content of the Biosecurity Law draft (including the part mentioning WuXi AppTec) is still subject to further deliberation and may be amended. The company is closely monitoring the progress of this draft legislation with its consultants.

WuXi AppTec emphasized in the announcement that the content of the bill is neither appropriate nor accurate. The development of WuXi AppTec's business will not pose a security risk to any country.

　　CROThe relevant stocks in the sector also plummeted following WuXi AppTec. Among them,Asymchem(002821.SZ) closed down 6.98%,Tigermed(300347.SZ) closed down 10.13%,Pharmaron(300759.SZ) closed down 12.94%.

The reporter of "China Times" noticed that in recent years, there has been a rise in ChinaCROThe industry's operations heavily rely on overseas markets.

The financial report shows that in the first half of 2023, WuXi AppTec's revenue from overseas customersOperating RevenueRMB 15.64 billion, accounting for 82.9% of the total operating revenue;AsymchemRevenue from households of overseas customers was 3.856 billion yuan, accounting for 83.43% of the total revenue.TigermedRevenue from overseas was 1.613 billion yuan, accounting for 43.46% of total revenue in 2022.PharmaronRevenue from overseas amounted to 8.386 billion yuan, accounting for 81.68% of the total revenue.

Notably, in this sudden crash, it was not the institutions that were dumping. On the contrary, institutions were picking up bargains against the trend at lower levels. Post-marketDragon Tiger ListShow that one institution net purchased 88.7192 million yuan, and one institution net sold 95.8648 million yuan.Shanghai-Hong Kong Stock ConnectThe dedicated seat purchased 518 million yuan and sold 587 million yuan, while the "Stock Trading to Support Family" seat net sold 344 million yuan.

　　Glen started to reduce its position in the fourth quarter

"WuXi AppTec" companies, as beneficiaries of the "medicine and alcohol" market trend from a couple of years ago, were once favored by many public offerings.FundThe heavy-holdings stocks, such as Ge Lan, who is called the "Goddess of Medicine" by investors, have multiple products under her name that heavily invest in the “WuXi AppTec system,” including Zhongou Medical Innovation and Zhongou Medical Health.

Data shows that, as of the end of the fourth quarter last year, a total of 385 products from 83 public offering and other types of asset management institutions held WuXi AppTec A-shares, with a total shareholding of 483 million shares.

Among them, the top three public funds holding WuXi AppTec A-shares are: ZO Fund, Jiaoyin Schroder.InvescoThe Great Wall, with respective shareholdings of 74.1134 million shares, 53.1655 million shares, and 52.8989 million shares. In terms of significant position changes compared to the end of the third quarter, the above three public funds respectively reduced their holdings in the stock by 7.0919 million shares, 1.9457 million shares, and 1.6946 million shares in the fourth quarter of last year.

In terms of individual products, Ge Lan's China Europe Healthcare, Hu Jie's Hua Bao Zhongzheng HealthcareETF, Yu Haiyan's E FundHS300The top three holdings of the pharmaceutical and healthcare ETF include WuXi AppTec A-shares, but all saw reductions in the fourth quarter of last year. Meanwhile, under Liu Yanchun...InvescoProducts such as Great Wall Emerging Growth, ICBC Frontier Healthcare managed by Zhao Bei, China Merchants Guozheng Biomedical managed by Hou Hao, and Zhongou Healthcare Innovation managed by Ge Lan hold significant stakes in this stock, each exceeding 10 million shares.

The plummet of WuXi AppTec and its futureCROWith the development of the industry, Zhongou Fund told reporters from the China Times: "We will not interpret specific individual stocks or short-term behaviors." Jiaoyin Schroder Fund told our reporter: "The fund manager is on a business trip."Research,Facing the sudden black swan event in the United States, I didn't have the heart to ask the investment research department."

As of the end of the fourth quarter last year, WuXi AppTec was the largest holding in three of Ge Lan's funds. The A-share of China Europe Healthcare held 58.5879 million shares, accounting forFund Net Value9.24%, making it the second-largest holding in the fund; China Europe Healthcare Innovation A holds 13.1347 million shares, accounting for 9.61% of the fund's net asset value; China Europe Mingrui New Start holds 1.59 million shares, also accounting for over 9% of the fund's net asset value.

However, Ge Lan reduced holdings in pharmaceutical research and development service (CXO) stocks in the fourth quarter of last year, which mitigated the damage. The fourth-quarter report of 2023 from Zhongou Healthcare showed that Ge Lan increased her position.Innovative DrugStocks in this category, while reducing positions in pharmaceutical R&D service stocks such as WuXi AppTec. For instance, China Europe Healthcare reduced its position by 2.91 million shares, and China Europe Healthcare Innovation reduced its position by 0.77 million shares.

As of the end of the fourth quarter last year, heavily weightedWuXi BiologicsThe most public offering belongs to E Fund, with total holdings exceeding 100 million shares; while the second and third largest heavy stockpiles belong to ZO Fund,Harvest Fund, holding less than 30 million shares; as for a single product, the one with the largest position in this stock is Zhang Kun's Easy Fund Blue Chip Selection, holding 78 million shares at the end of the quarter.

Ge Lan stated in the quarterly report: "In the first quarter of 2024, the global investment and financing environment is expected to gradually recover after the interest rate hike cycle. Policy measures in China may remain stable, and the industry’s understanding of the impact of compliance will become clearer. Although the base figures differ across sub-sectors, we believe that the pharmaceuticals industry as a whole will maintain a steady growth trend, with outstanding companies achieving long-term growth."Driving Force"No significant changes have occurred."

(Source: China Times)

Editor: Shi Xiuzhen SF183