WuXi AppTec warns traders to cool off after 6-fold stock price increase in 3 weeks

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A six-fold increase in its stock price has pushed WuXi AppTec's market cap to over $21.09 billion, higher than IQVIA’s $20.41 billion and the $18.26 billion of Covance’s parent company, LabCorp. (Pixabay)

The Chinese contract R&D and manufacturing giant WuXi AppTec has stopped to remind its investors to consider the risks of investing in life sciences and R&D companies such as itself. The reminder came after its stock price continued to climb at an incredible rate, exploding in the days following its Shanghai IPO.

Since going public earlier this month, WuXi AppTec’s stock has increased by the daily maximum of 10% allowed by the Shanghai Stock Exchange for 15 straight trading sessions, in what the company described in a filing as “abnormal fluctuations.”

Its stock price is currently pegged at 129.91 Chinese yuan ($20.24), a six-fold increase compared to its May 7 listing of 104 million shares at CNY 21.60 ($3.36). That vaulted the CRO’s market cap to $21.09 billion, compared to IQVIA’s $20.41 billion and the $18.26 billion of Covance’s parent company, LabCorp.

To possibly calm things down, WuXi AppTec wanted to draw investors’ attention to the operating risks inherent in international contract pharmaceutical research and longterm drug development, such as clinical research failures, safety accidents, litigation, reliance on raw material suppliers, early terminations of contracts and changes in regulatory policy.

Global currency fluctuations could also impact the bottom line, with the company’s business income being mainly settled in U.S. dollars, it said in a filing (PDF, Chinese) with the Shanghai exchange. In addition, investors should fully understand the risks of the stock market and make careful, rational decisions, it said.

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The warnings were repeated over several days in the past week, though the stock price continued to hit the daily 10% ceiling.

Overall, current operations and business activities have not changed, WuXi AppTec said, with no major adjustments being made. The company had said it plans to use the IPO’s proceeds to build and expand its R&D facilities in China, aiming to raise 5.74 billion CNY ($914 million).

WuXi AppTec had previously been listed on the New York Stock Exchange until it was taken private in 2015, with a $3.3 billion valuation. Today, the company employs over 14,000 across 26 international locations and subsidiaries, posting CNY 2.14 billion ($333.38 million) in quarterly revenue in March 2018.