WuXi AppTec Co. will face fresh questions about its growth prospects after the Pentagon named the major pharmaceutical contractor on a list of firms associated with the Chinese military, a move that could also complicate research being done by American drugmakers.
The Chinese company has performed various services for many of the world’s largest pharmaceutical companies, including drug discovery and commercial manufacturing. As of 2024, WuXi was producing much of the active base ingredient used in Eli Lilly & Co.’s obesity drug Zepbound, Bloomberg has reported.
The Defense Department’s designation is the latest sign of tension between the US and China over drug development and manufacturing. It could also jeopardize a major revenue driver for WuXi AppTec, according to Will Humphrey, a vice president on the healthcare team at advisory firm Capstone. About three-fourths of WuXi AppTec’s sales last year came from its US business.
Any restriction that stems from the designation could have broader implications because WuXi AppTec helps conduct research and development efforts on behalf of many US drugmakers. That includes a disproportionate impact on small- and mid-cap biotech companies that tend to rely on low-cost, high-quality Chinese service providers, Humphrey wrote in a note.
WuXi AppTec sought to ease concerns Tuesday, saying it is “not owned or controlled by or affiliated with any government or military organization.” No ongoing customer programs will be impacted, it added.
“All our facilities continue operating normally, and our scientists remain focused on advancing your breakthrough therapies,” the firm said in an open letter. “We will pursue all available remedies to correct this erroneous designation.”
‘Buoyant’ Outlook
With the new designation, existing US customers will have five years to wind down ongoing contracts, Bloomberg Intelligence analyst Jamie Maarten wrote in a note. About 206 billion yuan ($30.4 billion) in US revenue could be at risk during 2027 to 2030, she wrote.
The company’s Hong Kong-listed shares fell as much as 8.3% on Tuesday morning in Hong Kong, while shares listed in mainland China dropped up to 8%.
More pharma companies might try to diversify their supply chains in the wake of the new development, added Cui Cui, head of Asia healthcare research at Jefferies. Still, she said the impact on shares was largely driven by investor sentiment.
WuXi AppTec has weathered geopolitical headwinds since 2024, when it was first named in a law called the Biosecure Act. The final version of the law passed in December without naming WuXi, but bars US government agencies from contracting with organizations that use services from companies on the Defense Department’s list of “Chinese military companies.”
Despite those pressures, WuXi AppTec continued to secure new orders from American clients. US revenue grew 34% in 2025, with strong demand from obesity drugmakers, according to Jefferies’ Cui.
The firm’s underlying business and outlook “remains buoyant,” Nomura head of China healthcare research Jialin Zhang wrote in a note Tuesday.
A separate company, WuXi Biologics (Cayman) Inc., is not on the Pentagon list.
–With assistance from Steven T. Dennis and Lindsay Blakely.
(Updates throughout to add company response, share move and analyst comments.)
This report is auto generated from the Bloomberg news service. ThePrint holds no responsibility for its content.