WuXi Bio plans ADC spin-off and $500m Hong Kong IPO

CDMO WuXi Biologics has announced plans to spin-off its antibody-drug conjugate (ADC) operations with the goal of listing the division in an IPO on the Hong Kong Exchange that could raise $500 million.

The subsidiary, known as WuXi XDC, is a joint venture between WuXi Biologics (60%) and WuXi STA (40%) that provides contract R&D and manufacturing for bioconjugates, including antibody drug conjugates (ADCs). WuXi STA offers chemical CDMO services, while WuXi Biologics is its biologic counterpart. With its focus on developing conjugates, the new WuXi spin-off emphasizes how important the sector has become to novel drug companies.

According to the company, the spin-off will enable WuXi XDC to develop a global contract development and organization (CDMO) focused on bioconjugates, starting with ADCs and growing into all bioconjugates, including peptide conjugates, oligo conjugates and chemical conjugates (thus from ADC to XDC).

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WuXi’s press release says the company believes the ADC and bioconjugate market are at a growth inflection point, with parts of the market beyond the business scope of WuXi Biologics. Plus, spinning off a new company into an IPO will help the company fund the needs of expanding its ADC and bioconjugate services, it added.

WuXi XDC will offer services for antibodies and other biologics intermediates, chemical payloads and linkers, as well as bioconjugate drug substances and drug products.

Jefferies’ analyst Christopher Lui has valued WuXi XDC at between $2.5 and $3 billion, and said in a note: “WuXi Bio believes XDC is mature enough to run independently, and the potential IPO should allow higher talent/capacity/market share worldwide and in China.”

He added the unit was working on 102 integrated projects at the end of May, comprising of 58 preclinical, 30 Ph I, 9 Ph II, and 5 Ph III. Furthermore, Lui said of the 580,000 L of bioreactor capacity being built up by WuXi Bio, approximately 100,000 L is allocated for XDC.

“Management believes the potential IPO will allow easier resource allocations, including talent and capacity, across different business lines Wuxibio has: XDC, monoclonal antibodies, bispecifics, vaccines, etc. With XDC to run independently (raising money on its own), WuXi Bio can focus more on its mAb, BsAb, and meaningful biosimilars with plenty going off-patent globally in the next few years.”

After the spinout and IPO, WuXi XDC will remain a consolidated subsidiary of WuXi Biologics. The newco’s financial performance will be consolidated into the financial statements of WuXi Biologics. Because WuXi XDC’s 2022 revenue and adjusted net profit for the year accounted for only 6.5% of WuXi Biologics’ revenues, the company does not expect the spin out to affect the parent company’s results materially.

“The establishment and development of WuXi XDC is another testament to WuXi Biologics’ effective business growth strategy, demonstrating the company’s vision and determination to further strengthen its leadership in the bioconjugate industry,” said Chris Chen, CEO of WuXi Biologics and Chairman of WuXi XDC.

“The future of WuXi XDC is very promising. While the listing will allow WuXi XDC to realize its growth potential, it will also permit WuXi Biologics to continue to focus on our global CRDMO business capabilities, enabling faster, innovative development and manufacturing of biologics for partners and benefiting patients worldwide.”

A version of this article was first published in ChinaBio Today on July 10, 2023