The Pentagon has named major pharmaceutical contractor WuXi AppTec Co. on a list of firms associated with the Chinese military, a move that could threaten its business and complicate research being done by American drugmakers.
WuXi AppTec, based in China, has performed various services for many of the world's largest pharmaceutical companies, including drug discovery. As of 2024, WuXi was producing much of the active base ingredient used in Eli Lilly & Co.'s obesity drug Zepbound, Bloomberg has reported.
WuXi AppTec's shares in Hong Kong fell as much as 6% on Tuesday morning, while its mainland China-listed shares fell as much as 5.2%.
The Defense Department's designation is the latest sign of tension between the two countries over drug development and manufacturing. It could also jeopardize a major revenue driver for the company, according to Will Humphrey, a vice president on the healthcare team at the advisory firm Capstone. About three-fourths of WuXi AppTec's sales last year came from its US business.
The move stems from a law called the Biosecure Act, which bars US government agencies from contracting with organizations that use services from companies on the Defense Department's list of "Chinese military companies."
The legislation passed in December. 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.
WuXi AppTec said its inclusion on the Pentagon's list is "clearly a mistake." "We do not meet the statutory criteria for designation as a 'Chinese military company,'" a spokesperson said in an emailed statement to Bloomberg, adding that WuXi AppTec isn't controlled or affiliated with any Chinese military or government entity. In a separate stock exchange filing, the company said it will "take immediate actions to challenge and correct this erroneous designation."
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. A separate company, WuXi Biologics (Cayman) Inc., is not on the Pentagon list.
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