WuXi AppTec Exits U.S. and U.K. Cell & Gene Therapy Operations Amid Strategic Realignment Following Trump’s Election

On the evening of December 24, WuXi AppTec issued an announcement stating that its indirect wholly-owned subsidiaries, WuXi ATU (Ireland) Holding Limited and WuXi ATU (Hong Kong) Limited, had entered into a share purchase agreement with Altaris LLC (including entities controlled by it, hereinafter referred to as “Altaris”).

WuXi ATU, also known as WuXi Advanced Therapies, is a subsidiary of WuXi AppTec responsible for the manufacturing of cell and gene therapies (CGT). The assets being sold are the U.S. operating entity of the WuXi ATU business, Advanced Therapies, and its U.K. operating entity, Oxford Genetics. Under the agreement, WuXi AppTec will transfer its entire equity interests in Advanced Therapies and Oxford Genetics to Altaris in exchange for cash consideration.

Rumors of this transaction have been circulating for some time. In October this year, market reports indicated that, due to uncertainties surrounding the U.S. Biosecure Act, WuXi AppTec was planning to list for sale four facilities in Philadelphia, operated by its subsidiary WuXi Advanced Therapies (WuXi ATU), which is responsible for cell and gene therapy (CGT) manufacturing. Discussions have been ongoing for several months, and the company has engaged with competing contract development and manufacturing organizations (CDMOs) regarding the potential acquisition of all or part of these assets.

Subsequently, WuXi AppTec responded that the rumors were untrue and issued a voluntary announcement stating that it was carefully evaluating various factors to maintain its WuXi ATU business in the United States as much as possible. Now, the dust has settled.

Shortly before this transaction, on December 17, U.S. President-elect Trump secured enough electoral votes in the Electoral College meetings across various states, formally winning the presidency.

According to the announcement, from January to November 2024, the combined operating revenue of Advanced Therapies and Oxford Genetics amounted to approximately RMB 980 million (unaudited), representing 2.4% of the company’s audited operating revenue for the most recent fiscal year. The transaction does not constitute a material transaction, does not involve related-party transactions, and does not amount to a major asset restructuring. The transaction is expected to be completed in the first half of 2025.

WuXi ATU originally operated four major production facilities, located in Philadelphia (USA), Oxford (UK), Shanghai Lingang, and Wuxi (Jiangsu Province). In 2023, WuXi ATU announced the closure of its Shanghai Lingang production facility, drawing widespread attention from the industry and regarded as one of the pivotal turning points in the cell and gene therapy (CGT) sector.

The U.S. production base in Philadelphia, involved this time, was officially announced to commence operations at the end of 2020, providing cell therapy outsourcing solutions that include viral vector manufacturing, process development and manufacturing for cell therapies, and biosafety testing. At that time, WuXi AppTec publicly stated that the facility had been expanded, tripling its production capacity. The European entity involved, Oxford Genetics, located in Oxford, UK, was acquired by WuXi AppTec in 2021 for approximately $135 million. It is positioned as an “Innovation Center,” focusing on innovative R&D, particularly in the design and optimization of viral vectors.

However, according to a previous report by CLSA, the divestiture of these two segments was driven first by the impact of the U.S. Biosecurity Act and second by their growth rate falling short of expectations in recent years.

According to WuXi AppTec’s semi-annual report released this year, the commercialization projects of its ATU (Advanced Therapies Unit) business are still in the early stages of ramp-up, with some projects delayed or canceled and insufficient new orders. Furthermore, given the intense competition in the cell and gene therapy (CGT) sector, there is considerable uncertainty regarding long-term business development. In terms of data, WuXi ATU’s revenue for the first half of 2024 was RMB 570 million, a year-on-year decrease of 19.43%; revenue for the third quarter of 2024 was approximately RMB 295 million, representing a year-on-year decline of 24.3%. During the first three quarters of this year, revenue from the United States accounted for more than 60% of WuXi AppTec’s total revenue, while WuXi ATU’s total revenue reached RMB 853 million, constituting only about 3% of the company’s total revenue for the same period.

Edward Hu, CEO of WuXi AppTec, stated in the English-language press release last night: “Today’s agreement represents a positive step forward for the important services provided by ATU. Altaris is committed to growing ATU’s businesses by supporting its employees, customers, and patients. Meanwhile, WuXi AppTec will continue to focus on our ‘follow-the-customer’ and ‘follow-the-molecule’ strategies, advancing toward our vision of ‘making it possible to produce any drug and cure any disease.’”

This afternoon, WuXi AppTec issued a public response to the media: The company’s management believes that this transaction will ensure uninterrupted service and timely treatment for all customers and patients in urgent need of WuXi ATU’s cell therapy services. Meanwhile, scientists, technicians, and other employees involved in WuXi ATU’s operations in the United States and the United Kingdom can continue their work toward fulfilling the mission of “making it easy to make drugs and treat difficult diseases.”

For WuXi AppTec, the strategic divestiture of its overseas WuXi ATU operations serves a dual purpose. Unlike the well-established small-molecule and biologic sectors in the pharmaceutical industry, the cell and gene therapy (CGT) segment is characterized by numerous small enterprises and a high rate of outsourced clinical R&D. This landscape once attracted a surge of contract research, development, and manufacturing organizations (CXOs) into the field. However, as financing across the broader pharmaceutical sector has declined, particularly after many multinational corporations (MNCs) scaled back their cell and gene therapy pipelines, CXO capacity has significantly outstripped demand. Consequently, consolidating operations and reducing costs represents a prudent strategic decision.

On the other hand, some argue that the U.S. Biosecurity Act primarily targets allegations and suspicions related to genetic services. Divesting this segment would alleviate pressure on WuXi AppTec’s overseas operations and create room for growth. On December 7, with the formal submission of the U.S. National Defense Authorization Act (NDAA), it was confirmed that the Biosecurity Act was not included. As this is expected to be the final piece of legislation advanced by the U.S. Congress this year, WuXi AppTec has gained additional time and space to adjust its global business layout and strategy.

Spanning the period from massive investment inflows to successive “shutdowns” was a nearly three-year deep correction of the entire CXO sector, shifting from boom to bust. During the same three years, WuXi Advanced Therapies’ potential customer base—biotech companies betting on cell and gene therapy—also underwent a transition from a financing boom to a capital winter.

WuXi ATU holds a significant position in the global cell and gene therapy sector. Financial reports indicate that, as of the end of the first half of 2024, WuXi ATU provided process development, testing, and manufacturing services for a total of 64 projects. These included two commercial-stage projects, five Phase III clinical projects (two of which were preparing for marketing authorization applications), eight Phase II clinical projects, and 49 preclinical and Phase I clinical projects. Notably, during the reporting period, WuXi ATU added one new commercial project from a U.S. client for the world’s first innovative Tumor-Infiltrating Lymphocyte (TIL) therapy.

Meanwhile, WuXi ATU is preparing for the Biologics License Application (BLA) submission for the lentiviral vector (LVV) manufacturing of a commercial CAR-T product. It has completed Process Performance Qualification (PPQ) and has commenced post-PPQ production, with an FDA submission expected in the second half of 2024. In addition, the company is preparing for the BLA submission for the manufacturing of another blockbuster commercial CAR-T product, expecting to complete process validation in the first half of 2024 and submit to the FDA in the first half of 2025.

Nevertheless, WuXi AppTec’s continued expansion in the CGT sector appears to be driven by deeper strategic considerations. Previously, Chen Zhisheng, CEO of WuXi Biologics, shared his views on “CDMOs for gene and cell therapies” in an interview: “Each cell therapy project is unique. Lessons learned from one project do not necessarily prevent different, or even the same, mistakes from recurring in the next, resulting in a similar learning curve. Consequently, efficiency gains remain limited, suggesting that large-scale industrialization may not be suitable at the current stage.”

Currently, the field of cell and gene therapy (CGT) is demonstrating vigorous growth, with remarkable breakthroughs continuously emerging in research on novel immunotherapies such as tumor-infiltrating lymphocytes (TIL), T-cell receptor-engineered T cells (TCR-T), and chimeric antigen receptor natural killer cells (CAR-NK). Since the beginning of this year, the U.S. Food and Drug Administration (FDA) has approved multiple CGT therapies for commercial launch, including Amtagvi, Breyanzi, and Lenmeldy, injecting new vitality into the treatment of related diseases. Nevertheless, the path toward large-scale industrial manufacturing of CGT therapies remains fraught with challenges. The production processes are intricate and delicate, leaving no room for error at any stage; persistently high costs pose significant barriers to widespread adoption; and extremely stringent quality control standards mean that even minor deviations can result in total failure. These interrelated factors constitute key obstacles hindering the large-scale industrialization of CGT therapies.

Amid escalating geopolitical tensions, WuXi AppTec is prioritizing its overseas operations as a cornerstone of its strategic development to ensure sustained business growth and stability.

According to its 2023 annual report’s outlook for 2024, WuXi AppTec proposed to continuously build new capabilities and production capacity, advancing the construction of multiple facilities in the United States, Singapore, and other locations.

WuXi Biologics has taken similar steps. On March 19, WuXi Biologics announced that its integrated CRDMO center in Singapore had officially entered the construction phase, marking the first large-scale overseas CRDMO base in Asia. A week later, during its earnings conference call, WuXi Biologics stated that it would actively expand into overseas markets and continue to increase commercial manufacturing capacity in Germany, the United States, and Singapore.

Previously, WuXi AppTec and WuXi Biologics simultaneously announced in the summer of 2022 that they would build new facilities in Singapore, with each company investing approximately SGD 2 billion (about RMB 10.1 billion) over the next decade for project construction. By establishing extensive overseas production capacity, these companies can comply with local regulations and mitigate geopolitical risks. To some extent, this strategy serves as a viable “fallback option.”

In the first half of this year, WuXi AppTec achieved operating revenue of RMB 17.241 billion, a year-on-year decrease of 8.64%; net profit attributable to shareholders of the parent company amounted to RMB 4.240 billion, a year-on-year decrease of 20.20%. WuXi Biologics reported similar results. According to its interim report, WuXi Biologics recorded revenue of RMB 8.574 billion in the first half of this year, a year-on-year increase of 1.0%; profit attributable to owners of the company reached RMB 1.499 billion, a year-on-year decrease of 33.9%. In terms of gross margin, the company’s overall gross margin declined from 41.9% in the previous year to 39.1% in the current year.

Reference Article:

1. Killing Two Birds with One Stone: WuXi AppTec Sells ATU to Eliminate Future Risks. Xingcang Just Wants to Make Money

2. WuXi AppTec Transfers U.S. and U.K. WuXi ATU Operations to U.S. Fund: The “Optimal Solution” to the Biosecurity Act’s “Gray Rhino”? Cailianshe