WuXi AppTec still sees sales growing and expansions rolling in 2024 despite concerns over US biosecurity bill

In moments of great uncertainty, sometimes the best approach is to just press on.

That seems to be the strategy being embraced at CDMO WuXi AppTec, which issued a surprisingly upbeat 2024 forecast Monday despite concerns stemming from a national-security-related crackdown in the U.S.

All told, WuXi AppTec counts on revenue growth and expansion projects to unfold as planned this year, despite the looming threat from U.S. legislation that could put much of company’s business there on ice. 

The legislation poses a major threat to the Shanghai-based company, which last year channeled 26.1 billion yuan ($3.6 billion)—65% of its total revenue—from its customers in the U.S.

WuXi AppTec offered its annual prediction as it reported 2.5% revenue growth in 2023 to 40.34 billion yuan ($5.6 billion). Taking marketed COVID-19 projects out of the mix, WuXi’s growth was even more impressive at nearly 26% year over year.

Much of that business came courtesy of the U.S. Sales in Europe made up just 12% of WuXi AppTec’s 2023 revenue, while China accounted for 18% and Japan, Korea and other territories contributed a slim 5%, the company said in an earnings presentation (PDF).

On the horizon for 2024, WuXi AppTec expects revenues to land within a range of 38.3 billion to 40.5 billion yuan, growing somewhere between 3% to 9% after subtracting COVID projects. Cash flow should remain healthy, too, the company said, which should help WuXi keep its many capacity expansion projects on track.

The company issued its expectations “despite uncertainties in the external environment,” alluding to the threat posed by the BIOSECURE Act.  

In January, WuXi AppTec and its sibling CDMO WuXi Biologics were branded “foreign adversary biotech companies of U.S. national security concern” in the proposed legislation. The bill also called out Chinese genomics companies BGI Group, MGI and Complete Genomics.

WuXi AppTec and WuXi Bio were quick to defend themselves, with AppTec’s chief executive and co-CEOs penning an open letter in February to oppose the “misguided” U.S. defense initiative.  

The WuXi AppTec executives specifically called out the bill for making “blanket allegations” and said they were taking measures to correct the record while maintaining that the company “does not in any way pose a national security risk to any country.”

The passing of the BIOSECURE Act could deal a devastating blow to WuXi AppTec’s business. For one, the company would be cut off from the possibility of U.S. contracts or grants fueled by taxpayer dollars. But, more critically, the proposed law would forbid the federal government from contracting with other drugmakers who work with one of the aforementioned companies of concern.

That provision extends the scope of the BIOSECURE Act to “most companies in the U.S. life sciences industry that either are currently government contractors or hope to become one in the future,” law firm Lowenstein Sandler wrote in a note to clients Monday regarding the draft legislation.

WuXi AppTec’s chairman and CEO Ge Li took the company’s earnings release as another opportunity to strike back against the BIOSECURE Act and remind investors that the law is not yet set in stone. He called for due process and noted the legislation remains subject to further review and changes, during which time WuXi AppTec will “explore possible solutions” and appeal for a “transparent consideration of the facts.”

Vouching for its innocence, WuXi AppTec also clarified that it does not have a human genomics business and does not collect genomic data, nor is the company affiliated with any political parties, governments or armed forces.

Given the relative optimism displayed in WuXi AppTec’s 2024 guidance, it seems the company believes it can navigate the BIOSECURE imbroglio without incurring too much damage—at least for now.