Included in the U.S. "UVL" list, WuXi Biologics responded urgently

| Editor: Xiaochun

CXO share price "collapse"?

On February 7, the U.
S.
Department of Commerce's Bureau of Industry and Security (BIS) released an updated "Unverified List (UVL)", which was made public on February 8
.

On February 8, WuXi Biologics plummeted at the opening of the market, and once fell by more than 30%.
Trading was suspended in Hong Kong at 10:51 this morning, and it fell 22.
77% before the suspension
.

At the same time, the CXO sector fell sharply as a whole.
A-share WuXi AppTec opened with a limit of 1 minute at 94.
05 yuan, and the total market value shrank from over 300 billion yuan to 278 billion yuan
.

At noon on the 8th, WuXi PharmaTech issued a clarification announcement, saying that neither WuXi PharmaTech nor its subsidiaries were included in the "Unverified List (UVL)" by the U.
S.
Department of Commerce, and WuXi Biologics was an independent listed company, and WuXi PharmaTech did not.
Own any shares of WuXi Biologics
.

WuXi Biologics also urgently issued a statement saying that Wuxi WuXi Biologics Co.
, Ltd.
and Shanghai WuXi Biologics Co.
, Ltd.
were included in the "Unverified List (UVL)" of the U.
S.
Department of Commerce.
"Entity List" is a completely different concept with limited impact
.

Direct impact is limited

The U.
S.
Department of Commerce's Bureau of Industry and Security (BIS) blacklist includes Denied Persons List, Unverified List, Entity List, and Military End User List
.

The export, re-export, or domestic transfer of any U.
S.
item to individuals and entities on the Entity List requires a special license from the U.
S.
Department of Commerce, Bureau of Industry and Security, and license exceptions do not apply
.

In contrast, the unverified list is mainly aimed at the US Department of Commerce's Bureau of Industry and Security, which cannot identify the parties to the end-use of the items in its previous transactions, and theoretically as long as the inspection department can confirm that the transaction items are used compliantly, Companies placed on the unverified list are expected to be removed from the list
.

WuXi Biologics said the "unverified list (UVL)" listing originated from the fact that it has been importing certain hardware controllers and certain hollow fiber filters for bioreactors over the past 10 years, which are subject to U.
S.
export controls, the Department of Commerce has a routine process to verify that these items are being used properly on the site, i.
e.
for personal use and not for resale
.

However, due to the Covid-19 pandemic, this process has not been completed for the past two years
.

WuXi Biologics states that it complies with all U.
S.
export control regulations and will not re-export or resell these items to any other entity, and you are welcome to check for removal and removal from this list at any time
.

At the WuXi Biologics Current Situation Conference held by CITIC Construction Investment Pharmaceuticals on the morning of February 8, Chen Zhisheng, executive director and CEO of WuXi Biologics, said that due to being included in the list, Shanghai and Wuxi companies purchased bioreactor hardware and a very small number of filters It needs to be approved by the US Department of Commerce, other materials are not affected, and other companies are not affected
.

The impact is also quite limited, as no such equipment is required after the construction of WuXi's Shanghai and Wuxi factories, and there are European and Japanese suppliers available to replace
.

Go to sea in an all-round way

In December 2021, the U.
S.
Department of Commerce announced that it would add dozens of Chinese units to the Entity List, including some biotech companies, which immediately triggered a slump in WuXi’s stock price
.

Today, a similar move by the U.
S.
Department of Commerce also caused the stock price of related sectors to crash.
Why did the capital market react so violently to this incident?

With the outbreak of China's innovative drug industry, the CXO companies serving it have also developed rapidly.
They have undertaken a large number of orders from overseas pharmaceutical giants, and the proportion of overseas business has continued to increase
.

In 2020, WuXi Biologics accounted for the proportion of Chinese customers (40.
6%), the proportion of US customers (39.
0%), and the market proportion was basically the same
.

It can be foreseen that when the United States restricts the operation of CXO companies from a policy perspective, it will undoubtedly have a greater impact
.

In addition, many institutions believe that, benefiting from downstream innovative drug research and development needs and sufficient orders in hand, CXO is highly sought after by the market
.

In recent years, China's innovative drug industry has developed rapidly, and it can be said to be at the forefront in all aspects, but difficulties and challenges will inevitably be encountered in the process of development
.
However, I believe that sooner or later we will be able to overcome difficulties and stand at the forefront of the world
.