Coronavirus drugs research firm WuXi Biologics’ largest shareholder sells stake for US$893 million windfall

WuXi Biologics Holdings raised HK$6.1 billion by selling a 2.43 per cent stake after the market closed on Tuesday
WuXi’s stock has skyrocketed by about tenfold from its IPO price of HK$20.6

Medicine

Eric Ng

Published: 1:53pm, 2 Sep 2020

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The largest shareholder of WuXi Biologics, China’s biggest outsourced biologic drugs services provider, has sold its stake in the company for a ninth time since its initial public offering three years ago.

The stock has doubled in price since the start of this year, and WuXi Biologics Holdings raised HK$6.1 billion (US$893 million) by selling a 2.43 per cent stake after the market closed on Tuesday. It has now reaped HK$40.7 billion from selling WuXi shares.

WuXi’s stock has skyrocketed by about tenfold from its IPO price of HK$20.6. The company’s net profit, adjusted for share-based executives’ compensation and non-recurring accounting items not tied to its core operations, rose 40.7 per cent to 734 million yuan in the first half of 2020. Its adjusted net profit tripled to 1.2 billion yuan last year from 408 million yuan in 2017, the year in which it went public.

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Biologics Holdings’ selling price of HK$185 per share represented a 6.7 per cent discount on WuXi’s Monday close of HK$198.3. Its stock was trading 3.1 per cent lower at HK$192.2 on Wednesday afternoon.

Biologics Holdings is owned by its founders and various institutional investors, and is led by WuXi chairman Ge Li. It sold 33 million shares on Tuesday, it said in a filing to the Hong Kong exchange on Wednesday. Biologics Holdings’ stake in WuXi fell to 23.35 per cent from 25.77 per cent following the sale.

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The coronavirus pandemic has disrupted operations at many of WuXi’s American and European clients and delayed clinical trials, which has resulted in the deferral of about US$100 million in revenue to next year, according to an Essence Securities report. But the outbreak has also brought in more business. WuXi has signed more than 10 deals with clients to research antibodies that can potentially tackle the novel coronavirus, which Essence analyst Ma Shuai said could earn it US$80 million in revenue.

“In the long term, as demand for outsourced research and development (R&D) services further speeds up, and given the company’s execution capabilities despite the pandemic, it is set to grab a greater share in the global market,” Ma said in the report.

WuXi said in its interim results report that it had assembled a large team of R&D scientists and that it was cooperating with global partners on developing potential new Covid-19 treatments.

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The Wuxi, Jiangsu province-based company helps pharmaceutical and biotechnology companies discover, develop and manufacture biological drugs, by providing scientists, technology, know-how, laboratories and manufacturing facilities. Biologic drugs, also known as large molecule drugs, are extracted from living organisms. Most drugs in the market today are small molecule compounds, which are manufactured through chemical synthesis.

Many of the newest generation of cancer treatments are protein-based biologic therapies, which act on the body’s immune system to restore or to add to its capability to tackle cancer cells.

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Li, the WuXi chairman, controls 21.94 per cent of Biologics Holdings and has 58.42 per cent of its voting rights over key company decisions. Biologics Holdings ceased to be a controlling shareholder of WuXi in May this year, after an eighth round of share sell down.

This article appeared in the South China Morning Post print edition as: Top owner of WuXi Biologics sells shares

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