Understanding the Market | WuXi AppTec falls more than 4%, leading the decline in CRO concept stocks. Several companies adjust their US business, while domestic innovative drugs are still in an adjustment period
Several CRO concept stocks, including WuXi AppTec, saw their afternoon declines widen, with WuXi AppTec falling by over 4%. Recently, the legislative process of the U.S. "Biosecurity Act" is uncertain, leading Chinese pharmaceutical outsourcing companies to adjust their business in the U.S. Pharmaron sold its U.S. joint venture subsidiary to Johnson & Johnson for approximately USD 102.1 million, WuXi AppTec reduced positions at its U.S. factories, and WuXi Biologics suspended the construction of its U.S. base. The domestic demand for innovative drugs is weak, with poor performance by innovative drug CXOs, and time is needed for demand to recover. Loose liquidity is expected to bring about a revival in investment and financing, with overseas demand improving before domestic demand
Pacific Securities learned from Zhitong Finance and Economics APP that the concept stocks of CRO widened their losses in the afternoon. As of the time of publication, WuXi AppTec (02359) fell by 4.13% to HKD 31.35; GenScript Biotech Corporation (01548) fell by 3.85% to HKD 8.73; Pharmaron (03759) fell by 3.58% to HKD 9.16; and Tigermed (03347) fell by 2.6% to HKD 30.
On the news front, recently, there have been uncertainties in the legislative process of the U.S. "Biosecurity Act". The latest list of amendments to the NDAA (National Defense Authorization Act) passed by the U.S. House of Representatives did not include the "Biosecurity Act". With the continuous advancement of the U.S. "Biosecurity Act", Chinese pharmaceutical outsourcing companies have begun to adjust their business in the U.S. Pharmaron sold its U.S. joint venture subsidiary to Johnson & Johnson for approximately USD 102.1 million (equivalent to about RMB 725 million); WuXi AppTec reduced a small number of positions at a factory in Saint Paul, Minnesota; and WuXi Biologics suspended the construction of its base in Worcester, Massachusetts.
Pacific Securities pointed out that domestic innovative drugs are still in an adjustment period, with weak demand. The future improvement in investment, financing, demand, orders, and performance will still take time. The performance of innovative drug CXOs is poor, overall at the bottom of the industry cycle, with an expected 2023 performance growth rate of only 2.76%. It will take some time for demand recovery, order placement, and performance improvement. The bank believes that as the Fed's interest rate hike cycle ends, the gradual easing of liquidity is expected to bring about a recovery in investment and financing. Overseas demand will improve before domestic demand