WuXi AppTec Gobbles Up Subsidiary for Small Molecule Drug Push

Biotech firm WuXi AppTec Co. Ltd. said it plans to take complete control of its subsidiary STA Pharmaceutical Co. Ltd. to simplify its shareholding structure and focus on small molecule drug development.

The company’s Shanghai unit will buy the remaining 15% stake of STA Pharmaceutical for as much as 311 million yuan ($46.4 million), the company said in a filing (link in Chinese) to the Shanghai Stock Exchange on Friday.

Founded in 2003, Shanghai-based STA Pharmaceutical merged with AppTec’s pharmaceutical development division in 2017. STA Pharmaceutical reported a profit of 597 million yuan last year on revenue of 2.7 billion yuan, according to the statement.

The unit delivers small-molecule, active pharmaceutical ingredients — the active components of medicines — and drug product solutions to clients across the globe.

The transaction is intended to help STA Pharmaceutical to focus on its long-term development strategy and increase the efficiency of its business operations, AppTec said.

The deal came after the subsidiary delisted last month from the National Equities Exchange and Quotations (NEEQ), China’s over-the-counter stock market. Founded in 2012, the NEEQ was designed to be a cradle for startups and midsize companies to grow and then graduate to list on main boards.

AppTec is a unit of the formerly U.S.-listed WuXi PharmaTech (Cayman) Inc., which privatized in 2015 due to lack of interest from American investors. The biotech star is among an emerging group of fast-growing Chinese biotech firms that are tapping financial markets both at home and abroad as investors bet on their potential.

The company listed in Hong Kong in January last year, and closed flat on its debut. The stock, which opened 1.5% lower than its listing price of HK$68 ($8.70), declined to as low as HK$64.95 during trade, and jumped as high as HK$68.7.

AppTec made similar headlines in May, when it became China’s first drugmaker to list in Shanghai under an expedited listing process aimed at bringing more high-growth, high-quality companies to Chinese investors.

AppTec last month reported a strong annual performance in 2018 as China speeds up approvals for new drugs to shorten the innovation distance with developed markets. Its net profit increased 84.2% to 2.3 billion yuan last year, on revenue of 9.6 billion yuan.

Yang Ge contributed to the report.

Contact reporter Tang Ziyi (ziyitang@caixin.com)