Recently, the relevant bill is still in the preliminary review stage in the US Congress, and based on the current information and analysis of the external environment, it is expected that the impact of the bill on the business of the CXO (pharmaceutical outsourcing services) sector will be relatively limited.
On February 4, 2024, the company issued an announcement detailing and clarifying matters related to WuXi AppTec in a proposed draft legislation recently submitted to the U.S. House of Representatives and Senate. The announcement clearly stated that WuXi AppTec does not conduct human genomics business, and none of the businesses currently operating involve the collection of human genome data, and emphasized that the company has no affiliation with any ** or military organizations. WuXi AppTec firmly believes that it does not pose a risk to any country in the past, present and future, and therefore should not be pre-defined as a "biotechnology company of concern" in the draft. In addition, the company also announced that it will start February 2 at a rate of no more than 100 per share9 yuan (inclusive) ** repurchase of 1 billion yuan of shares, the repurchased shares will be cancelled and the registered capital will be reduced, which demonstrates the management's confidence in the company's long-term value and the determination to safeguard the interests of shareholders.
WuXi Biologics also issued a clarification announcement on the same day, stating that the draft bill is still in its early stages, and its specific content is still pending further review and possible revisions by the U.S. legislature, and has not yet been officially promulgated and entered into effect. The announcement also clarified that the company's chief executive officer, Dr. Chen Zhisheng, has not served for the Academy of Military Medical Sciences or any institution with a military background, nor has he received direct or indirect remuneration from these institutions. Similarly, WuXi Biologics has confirmed that it is not involved in human genomics and does not collect human genomics data in its various businesses. Based on this, the management team is confident in the company's development prospects and does not expect material adverse changes in the Group's business operations and financial condition. At the same time, the Company will continue its share repurchase program in accordance with the previously announced Share Repurchase Program, which will repurchase up to 424,841,176 Shares in the open market from December 5, 2023, representing 10% of the total number of issued shares on the date of the Annual General Meeting.
For the relevant bills in the United States, given the content mentioned in the bill, the complex legislative process and the low success rate of legislation, we believe that the probability of the final passage of the bill is relatively small. The U.S. legislative process usually involves multiple stages and takes a long time, and the current passage rate of China-related bills from submission to law is not high. For example, of the 313 China-related proposals put forward in the 116th Congress, only 13 finally came into effect (about 4.).15%), and of the 300 China-related proposals put forward in the first session of the 117th National Assembly, only 2 were successfully enacted (accounting for about 0.).67%）。Specifically, of the 167 bills proposed by Councillor Mike Gallagher since 2017, only 2 have finally taken effect (about 1.).19%）。
We maintain our previous view that the pharmaceutical industry is closely related to the national economy and people's livelihood due to its large investment scale, long cycle, slow effect and other characteristics, and as the basic support for serving the entire pharmaceutical industry - the pharmaceutical outsourcing chain, it is less likely that the first chain will be completely decoupled due to geopolitical factors. Leading domestic CXO companies with a deep foundation of cooperation, rich project experience and advanced technology are expected to maintain a sustainable competitive advantage in the global competition.
From the perspective of endogenous growth, the number of emerging pipelines such as peptides, small nucleic acids, ADCs, etc. has increased significantly, and with the rapid expansion of the market demand for indications such as advanced drugs and Alzheimer's disease, the pharmaceutical market is experiencing expansion. Domestic CDMO companies have a keen insight into industry trends, lay out new tracks in advance, and are expected to emerge in the global market competition with their leading technology platforms.
For example, PE valuations as of 2024 show that WuXi AppTec is 13x, WuXi Biologics is 13x, Pharmaron is 17x, Gloria is 20x, WuXi XDC is 33x, Jiuzhou is 11x, Haoyuan is 19x, PharmaBlock is 20x, Prius is 14x, Nord is 19x, Baicheng Pharma is 16x, and Sunshine is 22x. This provides investors with a good value investment opportunity.
Note: The data and opinions in this article are provided by the Tianfeng Pharma team and are for reference only and do not constitute investment advice.
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