Financial reporter Liu Jian.
On January 29, WuXi AppTec, a leading domestic CXO company, once again fell to the limit**, and the limit fell for two consecutive days becoming the focus of heated discussions in the market. In line with its rhythm, BGI is related to MGI, Pharmaron, Gloria and other sectors**. On the news side, U.S. lawmakers submitted a bill to prohibit U.S. companies from signing contracts with overseas biotechnology providers, and Chinese companies including WuXi AppTec and BGI** were mentioned. The sharp drop in stock prices also reflects the current situation of the domestic CXO industry highly dependent on overseas business, industry insiders analyze, there are still many procedures and time from the submission to the adoption of the draft, whether it can be passed is unknown, in the long run, this kind of news has a limited impact on the operation of listed companies.
WuXi AppTec was mentioned in a draft version of the Biosafety Act submitted to the U.S. House of Representatives on January 25, 2024, and a similar draft bill was recently introduced in the U.S. Senate, according to **. U.S. lawmakers are proposing to prohibit U.S. companies from contracting with overseas biotech providers, including procuring or acquiring any biotech equipment or services produced or provided by the relevant biotech companies, to ensure that these businesses do not have access to U.S. taxpayer funds. Chinese companies with overseas operations are directly affected by WuXi AppTec, BGI and its subsidiaries BGI, Complete Genomics, etc.
Affected by this news, on January 26**, WuXi AppTec's A-shares fell to the limit, and Hong Kong stocks also fell by 1643%。Hong Kong stock WuXi Biologics also suffered a heavy setback, ** fell 1817%。BGI's share price** exceeds 3%, and MGI's stock price** exceeds 5%.
After a weekend, on January 29, WuXi AppTec's A-share share price continued to gain a falling limit, and the stock prices of BGI and MGI also closed down, and MGI's share price fell by more than 12%. On the same day, WuXi AppTec was net sold by northbound funds for 69.1 billion yuan ranked first in the two cities, and the data of the Dragon and Tiger List in the three days after the market showed that the total net sales of seats of the three institutions were nearly 1 billion yuan.
In addition, a number of listed biopharmaceutical companies such as Univision, Pharmaron and Boji Pharma responded to the impact of the draft bill on related businesses, and most of them said that the relevant events would not have an impact on the company's current operations.
WuXi AppTec announced on January 26 that the draft biosafety law has not yet come into effect and has been promulgated, and the subsequent legislative process requires the U.S. House of Representatives and the U.S. Senate to vote on their respective versions of the bill after being reviewed by relevant committees. Therefore, the content of the draft is still subject to further consideration and possible changes.
WuXi AppTec subsequently responded to the content of the draft, saying that the company firmly believes that WuXi AppTec's business does not pose a danger to the security of any country; As a publicly traded company, there are more than 200,000 institutional and individual investors around the world who invest in and trade companies in the secondary public market**; WuXi AppTec was established"Biochemistry Research Award"It aims to discover and reward outstanding young and middle-aged scientific and technological talents who have made significant achievements or made outstanding contributions in scientific research, technological innovation and invention in related scientific and technological fields, and the selection criteria are only related to relevant scientific research experience, scientific research ability and scientific research achievements. Finally, the company stated that it will always comply with the laws and regulations of the countries in which it operates, including China and the United States. Over the past two decades, by adhering to the company's core values"Do the right thing and do it well"WuXi AppTec has been a trusted partner to the global healthcare industry, providing drug development and manufacturing services to thousands of customers in the U.S. and around the world, helping to bring innovative drugs to market for the benefit of patients around the world.
BGI also said that the company's management will evaluate and discuss this incident, and if it is really serious, it will have a serious impact on the company's performance, and it is not ruled out that it will take the initiative to communicate with the United States.
MGI also announced that the company noted that the draft is still in the proposal stage, and there are many factual errors in the company's allegations, which may be amended or terminated in the future, and there is still great uncertainty about whether it can form a law. The company strictly abides by the laws and regulations of the markets where it operates, and pays great attention to data security and privacy protection.
CXO industry is heavily dependent on overseas markets The news about the draft biosecurity law has caused a lot of fluctuations in the stock price of the entire domestic CXO market, and the stock prices of many companies such as Gloria, Tigermed, and Pharmaron have been sharply **, which also reflects the current situation that the domestic CXO industry business is highly dependent on overseas markets.
Taking WuXi AppTec as an example, according to the financial report data, in the past 10 years, overseas business has accounted for a large proportion of WuXi AppTec's main business, and the United States accounts for almost more than half. In 2022, the domestic proportion of the company's main business will only be 1904%, overseas accounted for more than 80%, of which the US business accounted for more than 65%. In the first half of 2023, WuXi AppTec's overseas operating revenue was 156400 million yuan, accounting for 82% of all operating income9%。In the first three quarters of 2023, WuXi AppTec's revenue was 2954.1 billion yuan, of which 19.4 billion yuan was from customers in the United States, accounting for 65% of the total revenue67%, and the revenue from European customers was 32800 million yuan.
Data**: Straight flush.
A comparison of the data of other CXO companies can also be seen to be highly dependent on overseas business.
In the 2023 interim report, Gloria's operating income from overseas is 385.6 billion yuan, accounting for 83.3 percent of all operating income43%, Tigermed's operating income from overseas was 161.3 billion yuan, accounting for 43% of the total revenue46%。
In 2022, Pharmaron's overseas revenue was 838.6 billion yuan, accounting for 81% of all revenue68%。
BGI** said that during the epidemic, the company seized the opportunity of the construction and expansion of the global precision medicine service system, and actively expanded the sustainable development of overseas business in multiple dimensions such as product qualification and localization strategic planning. In terms of strategic cooperation in overseas business, the company has signed a series of cooperation agreements with partners in Indonesia, Thailand, Chile, Argentina, Serbia and other countries to further promote the promotion and application of the company's precision medicine technology in the global market.
Why is the domestic pharmaceutical outsourcing service industry highly dependent on overseas markets?
CXO, commonly known as pharmaceutical outsourcing, is mainly divided into three links: CRO, CMO CDMO, CSO, which serve the R&D, production and sales of the pharmaceutical industry, which can be simply understood as R&D outsourcing, production outsourcing and sales outsourcing. According to the analysis of industry insiders, in recent years, with the intensification of global aging, the establishment of a large number of start-up pharmaceutical companies, the continuous and stable growth of R&D investment of pharmaceutical companies, the high cost of new drug R&D, and other factors such as China's engineer dividends, the rapid transfer of orders from overseas companies to China, coupled with good news on the domestic policy side, have made the domestic CXO industry develop rapidly. With the deepening of globalization, the R&D activities of pharmaceutical companies have accelerated the shift from independent R&D to R&D outsourcing, and the outbreak of China's innovative drug industry has also allowed the rapid development of CXO companies to undertake a large number of overseas orders.
According to the data, from 2017 to 2020, the total overseas revenue of major domestic CXO listed companies accounted for 627% increased to 71%, and the compound annual growth rate of overseas revenue was about 34%. The scale of China's CRO industry has increased from 13.6 billion yuan in 2011 to 67.8 billion yuan in 2018, with an average annual compound growth rate (CAGR) of more than 20%, and the CAGR will remain at 20% to 25% from 2019 to 2021.
Limited impact in the long run Industry insiders said that in recent years, the United States has repeatedly issued the so-called "entity list", including some listed companies in the CXO industry, and similar biosecurity law proposals are also available every year. In September last year, Biden signed an executive order to launch the National Biotechnology and Biomanufacturing Initiative to reduce the United States' dependence on foreign countries and ensure that the United States can turn all inventions into products. These news have caused market volatility to a certain extent, but as WuXi AppTec and other companies responded, it is still unknown whether these proposals will pass, and even if they are passed, it may take a long time to be implemented, so the impact on listed companies will be limited in the long run.
The latest view of China Securities Construction Investment believes that the fluctuation of the external environment has a limited impact on the market value of the overseas business of pharmaceutical and biotechnology. According to WuXi AppTec's announcement, the draft biosafety law has not yet come into effect and has not yet been promulgated, and the subsequent legislative process requires the relevant committees to review and vote on the respective versions of the bill to form the final version, which is still subject to change. Second, they expect that the impact on the industry will be limited, the psychological impact of the draft is greater than the substance, and the core criterion for selection is the assessment of the company's business competitiveness.
Tianfeng**'s latest research report believes that the trend of China's innovative drugs going overseas is clear, and since 2020, both in the form of rights grant and product approval for marketing, it has shown a trend of rapid growth. According to incomplete statistics, in 2023, the listed company has completed the grant of overseas rights and interests of more than 20 drugs under development, and 3 innovative drugs have been approved for marketing in the United States. They believe that after more than ten years of accumulation and iterative upgrading in recent years, as more innovative varieties complete key nodes such as proof of concept, registrational clinical trials, and approval for marketing, China's innovative drugs are expected to usher in more diversified and higher-quality development.
The views in this article are for reference only and do not constitute investment advice. ）