The drug services provider has been battling to shore up its share price and suffered a sharp sell-off after being added to a U.S. list of firms with suspected military links

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Key Takeaways:

  • Pharmaceutical firms hit by weakening Hong Kong valuations have been increasingly launching buyback programs to bolster investor confidence
  • WuXi AppTec is particularly exposed to any tightening of restrictions in the U.S. market, which is its biggest source of revenue

Shares in China's pharmaceutical sector have been hit by growing concerns about U.S. regulatory curbs and the impact of domestic price controls, although access to capital has improved and orders are reported to be flowing in.

With valuations subdued, a trend has emerged for companies to buy back their shares to bolster confidence. Industry leader WuXi AppTec Co. Ltd. (OTC:WUXAY) (OTC:WUXIF) (2359.HK; 603259.SH) went on a buyback spree for 10 straight days from May 26 in a campaign costing around HK$1.26 billion ($160 million), exchange data shows.

But WuXi AppTec's share price kept falling, compounded by news on June 8 that U.S. authorities were turning up the heat on the Chinese provider of pharmaceutical services by designating it a military-linked company.

On June 8, WuXi AppTec repurchased 912,600 shares at prices ranging from HK$119.20 to HK$123.80 per share, spending HK$110 million in a single day. Its buyback tally for the 10-day campaign reached 9.94 million shares.

The company has said the shares will be channeled into treasury stock for use in its incentive scheme for senior and technical staff. That leaves the number of outstanding shares unaffected and will not enhance per-share earnings. The primary objective appears to be to establish a pool of shares for equity incentives to retain talent and signal long-term confidence in the business.

WuXi AppTec is far from alone in its repurchase strategy. As shares in the healthcare sector have fallen to multi-year lows, about 80 pharmaceutical and biotech companies have carried out share buybacks since the start of the year, the most active of all industries. Other firms in the WuXi group have joined in. In late May, WuXi Biologics announced a buyback program of up to $400 million, while WuXi XDC disclosed a $100 million repurchase plan, all funded by cash on hand. Other industry leaders including Tigermed (300347.SZ) and Hengrui Pharmaceuticals (600276.SH; 1276.HK) have also unveiled sizeable buyback plans in recent months.

The buyback wave follows a prolonged period of share-price pressure. Valuations have slipped as capital rotated out of healthcare into rising sectors such as AI and semiconductors, while tighter Chinese policies on medical procurement and insurance crimped the profit outlook for innovative drug companies.

More recently, market confidence has been rocked by talk that regulators could tighten oversight of outbound licensing and business development deals. Meanwhile, companies in the global pharmaceutical supply chain now face a geopolitical-risk discount, with proposed U.S. legislation that would hinder contracts with federally funded medical providers.

Policy risks on the rise

Even as WuXi AppTec was scooping up its own shares, geopolitics reared its head again. On June 8, the U.S. Department of Defense added WuXi AppTec to an updated list of what it called Chinese military companies, drawing a swift and robust rebuttal from the company, which vowed to challenge the move. But shares in the Chinese drug services giant fell more than 5% that day.

WuXi AppTec insisted that it neither owned, controlled nor was affiliated with any Chinese military or government entity. The company did not provide services to the Chinese military and was not linked to the defense industrial base or military-civil programs, the statement said.

The damage to WuXi AppTec is not likely to come from sanctions or export restrictions, as the company is not involved in US defense procurement.
A greater risk lies in the compliance reviews that could be triggered within the supply chains of its major clients. For example, if a multinational is conducting drug research funded by U.S. federal agencies such as the National Institutes of Health (NIH), its legal and compliance teams may be more cautious when awarding new contracts or could even redirect projects to suppliers that are not on the list.

Any increase in U.S. policy risk has the potential to undermine investor confidence in WuXi Apptec's profit outlook. Its revenue from U.S. customers rose 34.3% in 2025 to 31.25 billion yuan ($4.61 billion), accounting for nearly 70% of its total turnover of 45.46 billion yuan.

At present, WuXi AppTec trades at a price-to-earnings ratio of about 15 times, below the roughly 23 times for its sister company WuXi Biologics, suggesting that investors have already priced in a significant level of policy uncertainty. Yet the company's performance appears solid. Its order backlog at the end of the first quarter exceeded 59.7 billion yuan, a year-on-year rise of 23.6%. With the share price appearing to diverge from fundamentals, some investors may want to consider at this point whether too much downside risk is being factored in.

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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.