(Yicai Global) Sept. 14 -- Shares in numerous Chinese providers of pharmaceutical contract outsourcing services plunged more than 10 percent yesterday after the US president signed an executive order to boost the country’s biomedicine manufacturing sector and reduce reliance on technologies supplied by other nations.

Chinese contract drug researchers and developers, otherwise known as CXO, that have a large share of their income coming from the US, all saw their share prices crash. Today, stocks recovered somewhat but have not made up for the losses in the last 48 hours.

WuXi AppTec’s mainland-traded stock [SHA:603259] was trading down 1.4 percent as of 11.30 a.m. China time today at CNY75.21 (USD10.90). Yesterday it sank by the exchange-imposed limit of 10 percent. In Hong Kong, its share price [HKG:2359] was trading up 3.4 percent at HKD71.15 (USD9). Yesterday it plunged 16.8 percent.

Wuxi Biologics [HKG:2269] was trading down 3.4 percent at HKD51.55. Yesterday it plummeted 19 percent. Asymchem Laboratories’ Shanghai-traded stock [SHE:002821] slumped 3 percent to trade at CNY146.20. Yesterday it too hit limit down. In Hong Kong [HKG:6821] it was trading flat at HKD90.90. Yesterday it slid 12 percent.

Pharmaron Beijing [SHE:300759] edged up 2.2 percent to trade at CNY57, but yesterday it sank 13 percent. In Hong Kong [HKG:3759] it gained 5.1 percent to trade at HKD44.30, bouncing back from yesterday’s slump of 13 percent. Hangzhou Tigermed Consulting’s mainland-traded stock [SHE:300347] dipped 1.2 percent to trade at CNY93, while yesterday it dived over 7 percent. In Hong Kong [HKG:3347] it fell 1.5 percent to trade at HKD68, an improvement on yesterday’s drop of 7 percent.

Some 66 percent of WuXi AppTec’s revenue in the first half, at CNY11.9 billion (USD1.7 billion), came from its US clients. Over half of Wuxi Biologics’ revenue over the period was generated in North America at CNY3.9 billion, while a quarter of Pharmaron’s revenue from clinical research as well as 84.17 percent of its income from cell and gene therapy services came from the US.

US President Joe Biden signed an executive order on Sept. 12 to bolster the country's biotechnology industry to ensure that the US remains a global leader in the development and production of key technologies. It will strengthen its supply chains and boost manufacturing capacity, among other measures.

Limited Impact

However, the impact of the executive order should be limited, executives at a number of Chinese biotech firms told Yicai Global.

Asymchem’s US orders are mainly for small molecule chemical drugs, not biosynthetic medicines, so the executive order will not affect the Tianjin-based firm’s business significantly, said the board secretary's office.

“We have a contract development and manufacturing base in the US, so theoretically the executive order will have a positive impact on our business in the country,” said Shan Yu, general manager of Shenzhen Hepalink Pharmaceutical Group.

However, the executive order will make it more difficult for Chinese companies to acquire US firms, which is a very important way for contract drug developers to grow, one such company told Yicai Global.

Asymchem’s acquisition of US chemical technology firm Snapdragon Chemistry fell through last week because it failed to meet the requirements of the US Treasury’s Committee on Foreign Investment in the US, the Massachusetts-based company said on Sept. 9. Asymchem was planning to take over Snapdragon, which develops innovative drugs and active pharmaceutical ingredients for large drugmakers in Europe and the US, for USD57.9 million.

Lower Costs

“Outsourcing drug development is the most cost-effective way to develop new medicines, and we do not think the executive order is bad news for China’s CXO industry,” said Liu Lihe, consulting director of China Insights Consultancy.

If US drugmakers abandon Chinese contract drug researchers and developers, which are some of the highest quality and most cost-effective in the world, they will have surging research and development expenses, Liu said. This goes against the Biden administration’s original intention to sign the executive order.

“The executive order’s impact will be short-term and won’t have a big impact on the market in the long run,” said Wang Wenhua, partner at CIC.

China is the world’s largest API maker and its API costs are much lower than the US, Wang said. Chinese CXO firms have much lower labor costs than their US peers and a rich talent pool, all of which are necessary for developing new drugs, he added.

China has a large population and can find a great number of patients quickly for clinical tests of new drugs. This is an important reason why Chinese contract drugmakers have seen their orders grow in recent years and have been able to seize a bigger share of the overseas market, he added.

Editors: Tang Shihua, Kim Taylor