U.S. lawmakers have made another bad move! WuXi AppTec has crashed and stopped, and Gülen has begun to reduce its position in the fourth quarter of last year

On the afternoon of January 26, the concept of CXO (Pharmaceutical Research and Development Services) suddenly dived, and a number of CXO companies also fell, and the leading WuXi AppTec crashed and stopped.

The reason for this is that, according to media reports, U.S. lawmakers have submitted a bill to prohibit U.S. companies from contracting with overseas biotech providers to ensure that these companies do not have access to U.S. taxpayers' funds, targeting Chinese companies with overseas operations, including WuXi AppTec and other companies.

As a "medicine mao", WuXi AppTec ranks high among the public offering of heavy stocks. Among them, Gülen, the "goddess of medicine", has three products that hold WuXi AppTec, with a shareholding ratio of more than 9% of the net value, and CEIBS Fund has also become the public offering institution with the largest shareholdings. It was followed by the Bank of Communications Schroder Fund, with a total of 24 products holding WuXi AppTec.

Flash crash stop

As of the close of trading on January 26, WuXi AppTec's A-shares fell to 65.96 yuan per share, with a total market value of 194.8 billion yuan, and H-shares fell 16.43% to HK$64.6 per share, with a total market value of HK$190.8 billion. WuXi Biologics (02269.HK) HK) also suffered a heavy setback, closing down 18.17% at HK$24.55 per share, with a total market capitalization of HK$104.5 billion. Shares of BGI fell more than 3%, and shares of MGI fell more than 5%.

On the news side, according to media reports, a draft version of the Biosecurity Act submitted to the U.S. House of Representatives on January 25, 2024, was mentioned, and a similar draft bill was recently introduced in the U.S. Senate.

U.S. lawmakers are proposing to prohibit U.S. companies from contracting with overseas biotech providers, including procuring or acquiring any biotech equipment or services produced or provided by the relevant biotech companies, to ensure that these businesses do not have access to U.S. taxpayer funds. Directly affected Chinese companies with overseas operations include WuXi AppTec, BGI and its subsidiaries BGI Manufacturing and Complete Genomics.

Shortly after the flash crash, WuXi Biologics' CEO announced: "This is just a proposal by a lawmaker, and it is a very unlikely event that it will become law, and it will take a few years for the company to make an announcement as soon as possible." ”

On the evening of January 26, WuXi AppTec issued a clarification announcement on this matter. WuXi AppTec said that the draft biosafety law has not yet come into effect, and the subsequent legislative process requires the U.S. House of Representatives and Senate to vote on their respective versions of the bill to form a final version after being reviewed by relevant committees.

WuXi AppTec believes that the content of the draft biosafety law, including the part that mentions WuXi AppTec, still needs to be further reviewed and may be changed. The Company is closely following the progress of the legislative process for this draft together with its consultants.

In the announcement, WuXi AppTec stressed that the content of the bill was neither appropriate nor accurate. WuXi AppTec's business development does not pose a risk to the security of any country.

Related stocks in the CRO sector also fell sharply following WuXi AppTec. Among them, Kailaiying (002821. SZ) closed down 6.98%, and Tigermed (300347. SZ) closed down 10.13%, while Pharmaron (300759. SZ) closed down 12.94%.

The reporter of "China Times" noticed that most of the CRO industry business that has emerged in China in recent years relies heavily on overseas markets.

According to the financial report, in the first half of 2023, WuXi AppTec's operating income from overseas customers was 15.64 billion yuan, accounting for 82.9% of the total operating income, Gloria's operating income from overseas customers was 3.856 billion yuan, accounting for 83.43% of the total operating income, and Tigermed's operating income from overseas was 1.613 billion yuan, accounting for 43.46% of the total revenue. In 2022, Pharmaron's operating revenue from overseas was RMB8.386 billion, accounting for 81.68% of all revenue.

It is worth noting that in this flash crash, it was not the institutions that smashed the market. On the contrary, institutions bucked the trend at the low level to pick up cheap chips. According to the after-hours Dragon and Tiger List, an institution bought a net of 88.7192 million yuan, an institution sold a net of 95.8648 million yuan, a special seat for Shanghai-Hong Kong Stock Connect bought 518 million yuan and sold 587 million yuan, and a "stock speculation" seat sold a net of 344 million yuan.

Gülen began to reduce his position in the fourth quarter

As a beneficiary of the "taking medicine and drinking" market in the past two years, WuXi companies have been heavy stocks of many public funds, such as Gülen, which is known as the "goddess of medicine" by shareholders, and has a heavy position in many products including CEIBS Medical Innovation and CEIBS Healthcare.

Wind data shows that as of the end of the fourth quarter of last year, a total of 385 products under 83 public offerings and other types of asset management institutions were heavily held in WuXi AppTec's A-shares, with a total of 483 million shares.

Among them, the top three public offerings of WuXi AppTec A-shares are: China Europe Fund, Bank of Communications Schroders, and Invesco Great Wall, with 74.1134 million shares, 53.1655 million shares, and 52.8989 million shares, respectively. In terms of changes in heavy positions, compared with the end of the third quarter, the above three public offerings reduced their holdings of 7,091,900 shares, 1,945,700 shares, and 1,694,600 shares respectively in the fourth quarter of last year.

In terms of individual products, Gülen's CEIBS Healthcare, Hu Jie's Huabao CSI Healthcare ETF, and Yu Haiyan's E Fund CSI 300 Healthcare ETF ranked among the top three in terms of heavy positions in WuXi AppTec's A-shares, but they all reduced their holdings in the fourth quarter of last year. At the same time, Liu Yanchun's Invesco Great Wall Emerging Growth, Zhao Bei's ICBC Frontier Medical, Hou Hao's China Merchants Guozheng Biopharmaceutical, and Gülen's CEIBS Medical Innovation all have heavy positions in the stock of more than 10 million shares.

Regarding WuXi AppTec's fall limit and the future development of the CRO industry, CEIBS Fund told the China Times: "Specific individual stock companies and short-term behaviors are not interpreted. Bank of Communications Schroder Fund told this reporter: "The fund manager is on a business trip to investigate, and in the face of the sudden black swan in the United States, I can't bear to ask the investment research department." ”

As of the end of the fourth quarter of last year, WuXi AppTec was the largest heavy stock in the three products under Gülen's name. CEIBS Medical & Health A holds 58,587,900 shares, accounting for 9.24% of the fund's net value, making it the second largest stock of the fund, CEIBS Medical Innovation A holds 13,134,700 shares, accounting for 9.61% of the fund's net value, and CEIBS Mingrui New Start holds 1.59 million shares, accounting for more than 9% of the fund's net value.

However, Gülen reduced his position in pharmaceutical research and development services (CXO) stocks in the fourth quarter of last year, and the damage was lessened. According to the 2023 quarterly report of CEIBS Healthcare, Gülen has increased its position in innovative pharmaceutical stocks, while it has reduced its position in pharmaceutical R&D service stocks, such as WuXi AppTec, of which CEIBS Healthcare has reduced its position by 2.91 million shares and CEIBS Medical Innovation has reduced its position by 770,000 shares.

As of the end of the fourth quarter of last year, E Fund had the largest public offering of heavy positions in WuXi Biologics, with a total holding of more than 100 million shares, while China Europe Fund and Harvest Fund, which ranked second and third in terms of heavy positions, held less than 30 million shares, and in terms of a single product, the largest heavy position in this stock was Zhang Kun's E Fund Blue Chip Select, which held 78 million shares at the end of the quarter.

"In the first quarter of 2024, the global investment and financing environment is expected to gradually recover after the interest rate hike cycle, the domestic policy side may remain stable, and the industry's awareness of the impact of compliance will be clearer," Gülen said in the quarterly report. Although the base of different sub-sectors is different, we believe that the pharmaceutical industry as a whole will still maintain a steady growth trend, and the driving force for the long-term growth of outstanding companies has not changed significantly. ”

Editor-in-charge: Shuai Kecong Editor-in-chief: Xia Shencha