HONG KONG—The shares of one of China’s most valuable biotechnology companies plummeted Tuesday, losing almost a quarter of their value after the U.S. Commerce Department flagged concerns about the firm to American exporters.
Two units of Wuxi Biologics (Cayman) Inc., 2269 -22.77% a Jiangsu-headquartered firm whose stock is listed in Hong Kong, were among 33 Chinese organizations that were added to an “unverified list” by the Commerce Department on Monday.
The list subjects foreign entities to tighter export controls, and requires them to supply additional documents and be subject to other checks to transact with U.S. firms. The Commerce Department said the move was because it hasn’t been able to verify the “legitimacy and reliability” of the 33 entities through end-use checks. Others named on the list included businesses in electronics and optics, as well as two universities.
Wuxi Biologics’ shares were halted from trading late Tuesday morning after dropping 23% and shaving nearly $10 billion off the company’s market capitalization, taking it to about $33.7 billion, according to FactSet data.
The stock—which multiplied in value earlier in the pandemic—is held by many international investors and is a component of major market benchmarks including the MSCI China Index, the FTSE China 50 Index, as well as the Hang Seng Index.
Wuxi Biologics provides technology platforms and solutions to manufacturers of biologic drugs. It also builds manufacturing facilities for other pharmaceutical and biotech companies. The firm reported the equivalent of about $267 million in profit in 2020 on revenue of $886 million, and said more than 40% of its revenue came from providing services to customers based in North America. Just a day earlier, Wuxi Biologics said it expects its profit for 2021 to double from the previous year.
On Tuesday, the company said the addition of its subsidiaries to the list would have “very minimal impact to our imports,” and that it wouldn’t affect its business or services to global partners.
The Commerce Department routinely verifies importers’ use of U.S. exported goods on-site, Wuxi Biologics said via its WeChat social-media account. The company has been importing hardware controllers for bioreactors and hollow fiber filters from the U.S. However, no such checks have been completed in the past two years due to the pandemic, it added.
“We welcome inspection at any time for the clearance and removal from such [a] list,” Wuxi Biologics said. The company is also pursuing measures in the meantime to have its subsidiaries removed from the list, it added.
The unverified list is one of the several lists published by the Commerce Department. It differs from the better known Entity List, which restricts access to U.S. exports unless the exporter secures a license. More than 300 Chinese entities including the country’s largest semiconductor maker, Semiconductor Manufacturing International Corp. , are currently on that list.
On Tuesday, the shares of Wuxi AppTec Co., a Shanghai-headquartered biopharmaceutical firm that is a sister company to Wuxi Biologics, also tumbled around 10%.
Wuxi AppTec, which is listed in both Hong Kong and Shanghai, said in an exchange filing that it hasn’t been added to the unverified list and it doesn’t hold any shares of Wuxi Biologics.
Write to Rebecca Feng at [email protected]
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