Chinese pharmaceutical company WuXi AppTec (603259.SH; 2359.HK) is divesting part of its cell therapy business in a bid to deal with potential U.S. restrictions.
WuXi AppTec announced late Tuesday that it has signed an agreement with Altaris to sell the U.S. and U.K. operations of its cell therapy unit WuXi Advanced Therapies (ATU).
Altaris is a U.S. equity fund focused on the healthcare sector.
According to the announcement, this part of WuXi AppTec's overseas business will be transferred for cash consideration.
The transaction is expected to close in the first half of 2025, subject to customary closing conditions and receipt of required regulatory approvals.
WuXi AppTec said the deal will ensure that there is no disruption in service to customers and patients and that the employees involved can remain committed to the company's mission.
It also emphasized that the divestiture is in line with the company's core guidelines and will not have a material impact on its earnings results and operations, and that the company's other major business units will remain operational.
Upon completion of the transaction, the business sold by WuXi AppTec will be rebranded and headquartered in the U.S. to operate as wholly-owned portfolio companies of Altaris, according to a statement from Altaris.
WuXi ATU is primarily focused on providing outsourced services related to cellular therapies, including viral vector manufacturing, cellular therapeutic process development and manufacturing, and biosafety testing.
According to WuXi AppTec, orders and revenues from its ATU business have not been as favorable as the market and the company had expected in recent times, mainly due to the proposed bill related to this driven by the U.S. Congress.
Over the past year, the threat of the proposed U.S. Biosecure Act has hung like a sword of Damocles over China's biopharmaceutical industry.
The bill sought to prohibit the U.S. federal government from entering into contracts with certain biotech providers with ties to foreign competitors, and WuXi AppTec was among the restricted entities.
While the bill ultimately failed to reach a definitive legislative conclusion during the current congressional term, it has had a substantial impact on WuXi AppTec's ATU business development.
In the first half of this year, WuXi ATU realized revenues of 575 million yuan, a year-on-year decline of 19.43%.
WuXi AppTec disclosed in its financial report for the first half of 2024 that its ATU business revenue and profit were less than expected due to the impact of the proposed U.S. bill.
The company further said that the key to the less-than-expected revenue is the lack of new orders, as well as the fact that some of the high-margin projects have been completed in 2023, coupled with the fact that "commercial projects are still in early stage of ramping up," making it difficult to quickly fill the revenue gap in the short term.
It can be said that WuXi AppTec's choice to sell its cell therapy business in the U.S. and the U.K. is a also measure taken in response to the potential impact of the proposed U.S. Biosecure Act.
