(Bloomberg) — Shares of WuXi AppTec Co. and WuXi Biologics Cayman Inc. surged Monday, after a draft US legislation targeting the Chinese biotechnology service firms was left out of a key defense bill.
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WuXi AppTec’s shares rose as much as 12% in early trading in Hong Kong on Monday, lifting the stock to the highest level in two months. WuXi Biologics gained as much as 13%, while MGI Tech Co. climbed 4.3% in Shanghai.
The absence of the so-called Biosecure Act from the proposed amendments to the US National Defense Authorization Act comes as a reprieve for the companies, which risked being barred from federally-funded contracts. Such restrictions would prompt global drugmakers to sever ties with Chinese drug research and contract manufacturers.
While there’s still a chance for the bill’s passage, the window is increasingly narrowing before the US Congress goes on recess.
“This seems a blue sky scenario exceeding investor expectations,” Jefferies analysts led by Cui Cui said in a note, as they reiterated WuXi Bio as their top buy.
Morgan Stanley analysts called it a “strong positive development” for WuXi names as well as other China-based companies offering contract research, development and manufacturing services with significant overseas revenue exposures.
Despite passing the House in September, opposition to Biosecure has been building in recent months, with influential lawmakers speaking out against the naming of specific companies on the bill without due process.
“We continue to provide lawmakers and federal agencies with the facts about our company and educate them on the valued services we provide customers in the U.S. and around the world,” a WuXi AppTec spokesperson said in an email.
MGI Tech, BGI Group and Complete Genomics Inc., the other firms named in the Biosecure Act, declined to comment. WuXi Biologics did not immediately respond to requests for comment.
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