CRO

WuXi AppTec acquires HD Biosciences, prepares IPO for biologics subsidiary

WuXi AppTec, one of the largest CROs in China, has just acquired a Shanghai-based preclinical counterpart, HD Biosciences, building further on its core business.

Services HD Biosciences provides include AGM-based target validation, plate-based pharmacology, hit identification, among others. It launched an operation facility in San Diego in 2015, with a focus on assay development and screening, compound management and logistics, and new technology development.

Acquiring HD Biosciences “is an important step in strengthening WuXi's biology and preclinical service capability,” and will expand its open-access enabling service platform, as the company’s goal is “to build the most comprehensive capability and technology platform in industry,” said Ge Li, chairman and CEO of WuXi AppTec, in a statement.

Upon completion of transaction, HD Biosciences will become a wholly-owned subsidiary of WuXi, according to the statement, but financial details were not specified.

WuXi has been quite active in the M&A field for the past few years, and those deals don’t exactly show a CRO-related pattern. In 2011, it acquired Abgent, a provider of biological research reagent products, plus two CROs based in Shanghai. The company strengthened its laboratory testing division, especially in bioanalytical, in vivo and in vitro services, through the acquisition of New Jersey-based XenoBiotic Laboratories. In 2015, with $65 million in cash, it bought NextCODE Health, a genomic analysis and bioinformatics company with operations in the U.S. and Iceland, and merged it with WuXi’s Genome Center into what’s now WuXi NextCODE. The Chinese CRO acquired Munich, Germany-based Crelux last April, gaining a stronger foothold in the European market.

The company, formerly known as WuXi PharmaTech, was listed on the New York Stock Exchange until management took the company private in December 2015 with $3.3 billion. Ever since then, speculations have never ceased that the CRO giant would seek re-enlistment in Hong Kong, or Mainland China.

Last February, Bloomberg reported that WuXi, with help from Bank of America and Morgan Stanley, was planning to bring its biologics unit to an IPO that would value the business at $1.5 billion. That intention became much clearer as WuXi Biologics just filed a draft listing application (PDF) in Chinese to HKEX early January.

The application also clarifies WuXi’s reasoning to withdraw from the New York Stock market, that “as a privately owned entity, WuXi PhamaTech’s management team can focus more on improving the company’s long-term financial performance…”

The document, quoting data by Frost & Sullivan, says WuXi Biologics, in terms of its 2015 revenue of 557 million Chinese Yuan (about $82 million), is the largest biologics CDMO in China, with a market share of 36.4%. The company’s revenue for the first three quarters of 2016 has already reached 696 million Chinese Yuan (about $102 million).

WuXi’s other subsidiary, STA, which focuses on API development and manufacturing, is currently traded on China’s new OTC market.

How WuXi AppTec’s core CRO business will return to the public market is yet unknown. Local financial newspapers, including China Business News, were torn in their predictions on whether the company will use a reverse merger or a normal IPO to get on China’s mainland stock market.