(Yicai) Nov. 10 -- The US Department of Defense has removed WuXi AppTec from its “Chinese military company” list following a successful legal challenge by the Chinese biotechnology giant, easing the threat of restrictions tied to the Pentagon's Section 1260H designation.

WuXi AppTec has been removed from the list because the US deputy secretary of war determined that the DOD should comply with a federal court order granting WuXi AppTec's application for a preliminary injunction, the Shanghai-based company announced yesterday, citing a DOD notice.

The DOD added WuXi AppTec to its “Chinese military company” list on June 8, in accordance with Section 1260H of the National Defense Authorization Act for Fiscal Year 2021, claiming it is “indirectly owned by the State-owned Assets Supervision Administration Commission of the State Council and is indirectly affiliated with the State Administration of Science, Technology, and Industry for National Defense and the People's Liberation Army.”

WuXi AppTec [SHA: 603259] closed little changed at CNY150.30 (USD22.53) in Shanghai today, after surging by as much as 5 percent in morning trading. Its Hong Kong-listed shares [HKG: 2359] ended 1.2 percent higher at HKD200.40 (USD25.55) each.

WuXi AppTec filed a lawsuit against the DOD with the US District Court for the District of Columbia on June 11 and submitted a preliminary injunction motion on June 29, seeking to prohibit the DOD from executing, implementing, or taking any other action based on the Section 1260H determination. The court held a hearing on the motion on July 22, and US District Judge James E. Boasberg granted the preliminary injunction on Aug. 7.

Entities on the Section 1260H list are prohibited from doing business with the DOD, so the immediate direct impact on WuXi AppTec would have been limited. But under the US Biosecure Act passed at the end of last year, any biotech firm on the list is automatically considered a candidate for the List of Biotechnology Companies of Concern.

Entities on the BCC list, as well as US pharmaceutical firms that have business ties with them, are prohibited from doing business with federal agencies. The long-term goal of the Biosecure Act is to remove Chinese companies on the list from the global drug research and development chain.

WuXi AppTec provides global pharmaceutical companies with entire-chain drug development services, from discovery to clinical development and commercial production. Income from US clients climbed 34 percent to CNY31.3 billion (USD4.6 billion) last year, accounting for 72 percent of the firm's total revenue, according to its annual financial report.

Editor: Futura Costaglione